The Cayman Islands, one of the most notorious tax havens in the world, has flooded 1,600% more money as Foreign Direct Investment (FDI) equity into Indian market during the financial year 2017-18.

Cayman Island recorded as the biggest growth in FDI equity inflow among the top ten FDI source countries including Mauritius and Singapore, according to data tabled in Parliament on Monday.

FDI from Cayman Islands shot up to $1.23 billion in fiscal 2017-18 from just $71.03 million in fiscal 2016-17.

Parliament data revealed that Cayman Islands not only tops in terms of growth, but also is ahead in the absolute FDI terms from Germany, Hong Kong and UAE which are among the top 10 sources of India's FDI.

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Inflows from Germany were $1.14 billion in India followed by Hong Kong ($1.05 billion) and UAE ($1.04 billion) in 2017-18.

"The reason behind this trend is low taxation and easy to create funds, which turned Cayman Islands kind of places as best destinations for worldwide companies. To some extent, Indians are also rerouting their money through such tax haven," a senior finance ministry official told DNA Money on condition of anonymity.

Rich people and banks, mostly Swiss banks, are domiciled in places like the Cayman Islands, where they have invested in traditional funds like UCTIS (Undertakings for Collective Investment in Transferable Securities). Economist Gabriel Zucman writes, "Today more than 60% of accounts in Switzerland are thus held through the intermediary of shell companies headquartered in the British Virgin Islands, trusts registered in the Cayman Islands, or foundations domiciled in Liechtenstein."

Minister of State for Commerce and Industry CR Chaudhary informed Lok Sabha that the growth rate of FDI in India hit a five-year low of 3% at $44.85 billion in 2017-18, the minister said in a written reply to Lok Sabha on July 23.

According to the report, Mauritius is India's top FDI source with $15.94 billion, followed by Singapore with $12.18 billion.

United Nations Conference on Trade and Development secretary-general Mukhisa Kituyi has reportedly said, "Downward pressure on the FDI and slowdown in global value chains are a major concern for policymakers worldwide, and especially in developing countries".