Mauritius: From Sugar to Services

How Mauritius transformed from a sugar economy into a middle-to-high-income country through export zones, tourism and financial services, and its tax treaty with India.

Mauritius, an island in the Indian Ocean, is one of Africa’s success stories.

Sugar origins

Under colonial rule, Mauritius depended on sugar plantations.
Indentured labourers from India came from 1834; people of Indian origin form the majority today.

The Meade prediction

In the 1960s, economist James Meade predicted a gloomy future for Mauritius due to population growth and sugar dependence.

The transformation

Export processing zone from 1970 attracted textile and garment factories.
Tourism built on beaches.
Financial services and offshore business.

Institutions

Stable democracy and good governance helped.

India tax treaty

The India-Mauritius double taxation avoidance agreement (1983) made Mauritius a major route for foreign investment into India, partly to avoid capital gains tax.
India amended the treaty in 2016 to tax capital gains, reducing this “treaty shopping”.

Today

Mauritius reached upper-middle to high-income status.

The treaty route

Before 2016, many foreign investors routed money into Indian shares through Mauritius-based entities to avoid Indian capital gains tax.

Thinking small sugar economies are doomed

Mauritius diversified successfully.

Key takeaways

Mauritius began as a sugar economy.
People of Indian origin form the majority.
An export zone, tourism and finance transformed it.
India amended its tax treaty in 2016.