India-Cyprus Relations: Bilateral Ties, Trade, DTAA, Diaspora & Strategic Importance

Source: PIB
GS II: International Relations

Overview

1. News in Brief
2. India-Cyprus Relations
3. Way Forward 
4. Cyprus in the World Map

Why in the News?

Prime Minister Shri Narendra Modi, along with the President of Cyprus, H.E. Nikos Christodoulides, held a Roundtable interaction with business leaders from Cyprus and India in Limassol.

News in Brief

• The participants represented diverse sectors such as banking, financial institutions, manufacturing, defence, logistics, maritime, shipping, technology, innovation, digital technologies, AI, IT services, tourism and mobility.
• Cyprus was a significant economic partner for India, particularly in the Foreign Direct Investment sector and welcomed the keen interest in Cyprus for new investments into the Indian economy.
• Cyprus prepares to assume the Presidency of the EU Council next year.
• The roundtable had given practical suggestions which would form the basis for a structured economic roadmap, ensuring long-term collaboration in trade, innovation and strategic sectors.

India-Cyprus Relations

• India-Cyprus relations are marked by longstanding historical ties, strategic relevance, and growing contemporary importance.
• Dating back to ancient times, both nations shared cultural exchanges through trade and maritime routes.
• Diplomatic relations were formally established in 1962
• Since then, Cyprus has remained a consistent supporter of India on key international issues, including its stance on Kashmir and India’s bid for a permanent seat in the UN Security Council.
• As a member of the European Union, Cyprus acts as a strategic partner for India in fostering relations with Europe and the Mediterranean region.
• Economic cooperation, particularly in investment, shipping, and education, has seen considerable growth in recent years.
• Additionally, collaboration in areas like IT, renewable energy, and tourism further strengthens bilateral ties.
• For India, enhancing its engagement with Cyprus aligns with its broader foreign policy objectives. 

Historical Background

• The historical background of India-Cyprus relations is rooted in shared civilizational links and a common struggle against colonialism.
• Both nations gained independence in the mid-20th century
  • India in 1947
  • Cyprus in 1960
• Both nations have since shared cordial and cooperative relations.
• Initial relation
  • Diplomatic relations were established in 1962.
  • This marks the beginning of a strong bilateral partnership based on mutual respect, democratic values, and non-alignment principles.
  • India has consistently supported the sovereignty, unity, and territorial integrity of Cyprus, especially in the context of the Cyprus issue involving Turkish occupation of Northern Cyprus.
  • In return, Cyprus has extended unwavering support to India in international forums, including its long-standing endorsement for India’s permanent membership in the United Nations Security Council (UNSC).
  • High-level visits have further strengthened diplomatic ties.
  • Notably, the President of Cyprus, Nicos Anastasiades, visited India in 2017, meeting Prime Minister Narendra Modi and signing multiple agreements in areas such as air services and merchant shipping.
  • Prime Minister Modi has also interacted with Cypriot leaders on the sidelines of international summits, reaffirming India’s commitment to deepening ties.
  • This robust historical and diplomatic engagement underscores the strategic nature of India-Cyprus relations.

Economic and Trade Relations

• India–Cyprus
  • Bilateral Trade with Cyprus reached approximately USD 137 million in FY 2023–24
  • This signals a modest but stable commercial relationship.
• Information Technology & Digital Services
  • With over 7,000 Indians residing in Cyprus—primarily IT professionals—Indian expertise supports Cypriot firms, especially in fintech and cybersecurity.
• Pharmaceuticals
  • India, the world’s third‐largest producer by volume, exports a wide range of generic medicines to Cyprus, reinforcing its global pharma outreach.
• Infrastructure, Machinery & Vehicles
  • Indian exports include machinery, vehicles, and electrical equipment, while Cyprus exports iron, steel products, and industrial machinery to India.
• Tourism & Shipping
  • Cyprus is a leading maritime centre in the Mediterranean, attracting Indian tourists and investors
  • Bilateral MoUs in shipping and air connectivity aim to harness this potential.
• Investment & FDI
  • Cyprus has been a major conduit for FDI into India.
  • Between April 2000 and September 2015, it was among India’s top 10 FDI sources, contributing over USD 8.3 billion, particularly in services, real estate, software, automotive, shipping, and pharmaceuticals.
• Tax efficiency and a revised DTAA (2016) have made Cyprus an attractive gateway for European investment.

India-Cyprus DTAA (Double Taxation Avoidance Agreement)

• The India-Cyprus DTAA (Double Taxation Avoidance Agreement) was originally signed in 1994 to prevent double taxation and promote cross-border investments.
• Due to concerns over round-tripping a method where Indian entities route money through Cyprus to reinvest in India, led to its revised version in 2016.
• The revision aimed to curb tax evasion and enhance transparency in line with global standards.
• Under the amended tax treaty, India gained the right to tax capital gains arising from the alienation of shares acquired on or after April 1, 2017.
• This move discouraged the misuse of the agreement for black money generation and ensured more legitimate and compliant FDI inflows from Cyprus.
• Consequently, Cyprus was removed from India’s list of “Notified Jurisdictions.”
• The revised India-Cyprus DTAA has strengthened economic relations, promoted clean investment flows, and supported India’s efforts in building a transparent tax regime.

Indian Diaspora in Cyprus

• Approximately 8,000 to 10,000 Indians currently reside in Cyprus, contributing actively to its economy and society.
• Indian diaspora includes IT professionals, hospitality workers, and a growing number of students pursuing higher education.
• The Indian community plays a vital role in sectors such as technology, tourism, and healthcare.
• Indian associations in Cyprus promote cultural diplomacy by organising festivals and fostering people-to-people connections.
• Their presence not only strengthens bilateral ties but also enhances India’s soft power in the Mediterranean region, making the diaspora a strategic asset in India-Cyprus relations.

Strategic and Political Cooperation

• India and Cyprus share strong strategic and political cooperation, rooted in mutual respect for democracy, sovereignty, and a rules-based international order.
• Cyprus has consistently supported India’s candidatures in international forums, including its bid for a permanent seat in the United Nations Security Council (UNSC).
• Both countries actively cooperate in multilateral platforms such as the United Nations, the Commonwealth, and the Non-Aligned Movement (NAM).
• This alignment on global issues strengthens their diplomatic engagement and enhances India’s outreach in the Mediterranean region, making their partnership a key component of India’s evolving foreign policy architecture.

Way Forward

• Deepening trade ties in new sectors: renewable energy, digital tech.
• Promoting people-to-people links through education and cultural exchanges.
• Strengthening strategic cooperation at multilateral platforms.
• Leveraging Cyprus’ EU status for India’s European outreach.

Cyprus in the World Map