FDI is here. Stay home, Mr Modi.

Prime Minister Narendra Modi has set off for yet another overseas visit, something he obviously revels in, ostensibly to seek foreign investment. What India needs is investment, whether foreign or Indian doesn’t matter. As Indians have now emerged as one of the world’s biggest overseas investors, he should be pursuing investment at home more vigorously than abroad. Overall foreign direct investment (FDI) into India grew by 27 per cent year-on-year to $30.93 billion in 2014-15. Mauritius accounted for about 29 per cent of the country’s total FDI inflow. India attracted $9.03 billion in FDI from Mauritius in 2014-15, whereas it was $6.74 billion from Singapore. Both these countries are tax havens and money from them is mostly pass through funds. So who is actually investing in India?

Mergers and Acquisition (M&A) data may be closer to the truth as it’s based on actual ownership of the company as opposed to flow of funds. A comparison of the available FDI data to M&A data for India reveals an entirely different picture. Countries like the US and the UK together make up 50 per cent of M&As into India, and Japan is responsible for another 10 per cent, together accounting for three-fifths of FDI via M&A inflows into India.

While M&A data will tell us about the citizenship of the corporates, we will never know the citizenship of their primary owners. But according to those familiar with this, Indians are the biggest source of FDI investment in India. Indians are big FDI players in the UK and their annual investments there by far exceed UK investments in India. Globally, the UK is the third-largest country in terms of its absolute value of inward FDI stock, understandably behind the US and China. The UK is again the top destination for FDI in Europe. In 2014, the UK attracted the highest number of FDI projects and received the largest value of FDI net inflows in Europe, as confirmed by independent sources.

During 2014-15, the UK recorded a total of 1,988 FDI projects — 12 per cent more than in the previous record-breaking year. And UK inward FDI stock — the amount of foreign direct investment in the UK — is estimated to have passed the £1 trillion level in 2014. Preliminary estimates from the Organisation for Economic Co-operation and Development (OECD) are that the UK has achieved a 50 per cent increase in FDI inflows in a year when the global value of FDI flow fell by 11 per cent.

The UK’s increased focus on emerging markets in recent years is starting to pay off. India has become the third-largest source market for FDI projects in UK. In terms of individual countries, the US remains the single-largest source of FDI projects. During 2014-15, a total of 564 FDI projects were recorded from the US, up more than 12 per cent from the previous year. France has become the second-largest source of FDI projects for the UK — 124 projects, an almost 13 per cent increase from last year. Investments from India increased by 65 per cent, making it the third-largest source of FDI. Higher than even Germany.

Indian pharmaceuticals company Cipla is set to invest £100 million in UK-based research on a range of drugs. Automotive manufacturer Mahindra will also inject £20 million into the British economy as it develops its electric vehicle technology — the company’s first car is expected to go on sale in the UK within a year. Additionally, with 1,000 companies in Britain, led by Tata, the Jaguar Land Rover parent — Indian investment in Britain is more than in the rest of Europe combined.

Like FDI into India, Indian FDI overseas also mostly transits through tax havens. Netherlands and Singapore attract most of the FDI from India, with a share of 28.8 per cent and 15.2 per cent respectively. British Virgin Islands and Mauritius have a share of 10.3 per cent and 7 per cent with investment of $3,687 million and $3,029 million made in these countries respectively.

In addition, a huge amount is sent abroad illicitly via financial channels. Washington DC-based research body, Global Financial Integrity (GFI), has calculated that more $439 billion of illicit funds flowed out of India between 2002 and 2012. Illicit funds can be money from evasion of taxes or capital controls, bribes and kickbacks, or proceeds of crimes like human and antiquities trafficking. We care about illicit funds because they are a drain on the economy that, in many ways, perpetuates poverty and inequality worldwide. India exports four per cent of its GDP illicitly or 10.3 per cent of its foreign trade.

Last year it sent out via these channels about $51.63 billion, which is equal to 215.4 per cent of the incoming FDI. Indians are becoming wealthier. Some much faster than others. The Hurun Global Rich List of 2015 says that India has broken into the top three of the billionaires list for the first time; India added 27 billionaires since 2014 to take the total to 97. It has replaced Russia and sits behind the US and China which still lead by a wide margin with 537 and 430 respectively. The combined wealth of these billionaires is close to $266 billion. Mr Modi would do better by staying back in India and coax these rich folks to invest more in India and less abroad.

And he has much work to do here. India ranks 130/189 in the World Bank’s Ease of Doing Business rankings. Chairman of Aditya Birla group, Kumaramangalam Birla, recently said delays of two-three months were pretty much the norm in India at present and it had been noticed that India was the least transparent and most uncertain of the 36 countries that the group operates in. My message to Mr Modi would be to stay home as the FDI is here.

The writer, a policy analyst studying economic and security issues, held senior positions in government and industry. He also specialises in the Chinese economy