Round Tripping
One of the leading puzzles related to cross border flow of investment is the phenomenon of ‘Round Tripping'. Here, money from a country (eg. India) flows to a foreign country (Mauritius) and comes back as foreign direct investment to India.
We were told that demonetization would combat the black economy and also crack a whip on the funding sources of terrorist outfits by curbing the circulation of Fake Indian Currency Notes. Far from it we are again in the midst of mindless terror acts across the Red Corridor and the Kashmir region.
What we were not told about the black money however was that while Indian govt. was cracking a whip on the informal economy the actual black money was already being routed back into India legally via FDI.
While the government is busy waging war on black money, international watchdog Global Financial Integrity has estimated that black money worth as much as USD 21...