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After drop in FDI,govt eyes rule change

After FDI inflows dropped alarmingly,India is considering liberalising its FDI policy,says FM.

Written by Agencies | New Delhi | Published: March 4, 2011 11:11:10 am

India is in talks to further liberalise its foreign direct investment (FDI) rules,Finance Minister Pranab Mukherjee said on Friday,as Asia’s third-largest economy looks overseas to fund key sectors and overhaul its infrastructure.

* India’s FDI inflows slowing

* $1 trillion infrastructure investment needed over 5 years

India’s FDI inflows have fallen sharply during this financial year,as slow progress on opening up sectors such as retail,insurance and infrastructure,seen as key to sustaining rapid growth,and a stumbling global recovery hit investor appetite.

Last month the government warned of a further slowdown that would strain India’s balance of payments if reforms were not undertaken to remove regulatory barriers deterring inflows.

Discussions are underway also to liberalise the FDI policy,Pranab Mukherjee said at a meeting of the Institute of International Finance.

The long-mooted entry of major global players into the country’s retail sector is seen reducing stubbornly high inflation,while India’s creaking infrastructure is viewed by many as a crucial impediment to double-digit GDP growth.

Even though the domestic savings rates are high and have recovered since the global crisis,we need significant inflows of capital to finance our infrastructure needs,Mukherjee said,noting that India required $1 trillion of investment in its infrastructure between 2012-17.

It is our intention to come up with a comprehensive policy that can be used by the centre and state governments in improving the resource flow to the sector,he said,adding that India’s experience with the public-private-partnership model for infrastructure development had been encouraging.

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