Foreign investment limits in different sectors where ceilings are not serving their intended purpose will be revisited, Finance Minister P. Chidambaram today said.
"The government is looking at FDI caps to see if they are indeed serving the purpose. Otherwise, the caps could be revisited," he informed at a meeting of the parliamentary consultative committee of the Ministry of Finance.
The agenda for the meeting was 'The current account deficit - implications and measures to contain the deficit'. While India allows 100 per cent foreign direct investment (FDI) in a large number of sectors, there is a ceiling on foreign investment in sensitive segments like multi-brand retail, insurance, defence and telecom.
The government is keen on increasing FDI ceilings to attract more inflows, and finance the widening current account deficit (CAD). Commerce and Industry Minister Anand Sharma on Sunday had said he would soon move the cabinet for raising FDI cap in telecom and defence sectors, as the government wanted to revive economic growth and spur investments.
The major reason for India's large CAD is that the country has huge dependence on import of certain items like oil, coal and gold, added Mr. Chidambaram. India's CAD, which touched record high of 6.7 per cent of GDP in the December 2012 quarter, is likely to be around 5 per cent in the 2012-13 fiscal. As per the RBI, India can sustain CAD in the range of 2.5 per cent.
Economic growth rate slipped to a decade low of 5 per cent in 2012-13, and FDI inflows during the last fiscal declined by 38 per cent to $22.42 billion in 2012-13.
Mr. Chidambaram assured that despite recession in major economies, India continues to remain a desired destination for FDIs and FIIs.
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