Govt considering hike in FDI cap for defence sector: Rajan

At present,foreign direct investment (FDI) in defence sector is limited at 26 per cent but the department of industrial policy and promotion had mooted a proposal to hike the limit to 49 per cent,a bill for which,is pending in the Rajya Sabha since 2008.

Additionally,the government is also expected to announce measures on coal pricing soon,Rajan said,adding that this would clear the logjam in the coal sector.

But conceding that returning to an 8 per cent GDP growth in the immediate future from 5 per cent clocked last fiscal would be difficult,Rajan said that the government is confident of achieving over 6 per cent economic growth in the current fiscal through increased government spending,a more optimistic outlook on the agriculture sector as well as faster clearances of projects by the Cabinet Committee on Investments.

“Better things could be on the way and we may see some stronger growth,” Rajan said,maintaining that growth has bottomed out. However,the chief economic adviser stressed that more measures are needed for a sea change in investor sentiment which currently is not strong.

The finance ministry’s comments come soon after official data showed that the economy clocked a mere 4.8 per cent growth in the fourth quarter of the fiscal 2012-13 and the full fiscal growth was a mere 5 per cent. For 2013-14,the Budget has estimated the economy to expand between 6.1 and 6.7 per cent.

“Clearly,we can’t rest now,” adding that enactment of pending Bills including the Constitutional Amendment Bill for goods and services tax,Insurance Laws Amendment Bill and the Companies Bill will signal to both domestic and foreign investors that the government is “moving forward”.

“So legislations help growth by enhancing investor confidence,” he said.

Additionally,he also called for better implementation and coordination as well as decision making by the executives to ensure that reforms that have been undertaken can have the desired effect.