Finance minister P Chidambaram on Monday favoured easing of caps on foreign direct investment (FDI) in some sectors amid indications that the government was readying a series of measures to attract foreign investment and dollar inflows into India.
"The government is looking at FDI caps to see if they are indeed serving the purpose. Otherwise, the caps could be revisited," he said at a meeting of the Parliamentary Consultative Committee of the Ministry of Finance.
While India allows 100% FDI in a large number of sectors, there is a ceiling on foreign investment in sensitive segments such as multi-brand retail, insurance, defence and telecommunications.
Last week, the finance minister had said that a number of decisions to accelerate reforms and spur investments in critical sectors can be expected shortly.
This is of critical importance with the Indian economy slowing to a 10-year low growth rate of 5% in 2012-13.
Chidambaram also told the committee that the only way to contain the current account deficit (CAD) — the difference between dollar inflows and outflows — is to increase the domestic production of oil and coal and restrain the consumption of gold.
"The extent of CAD and its financing are the two major concerns… It is important to finance CAD than to draw from the reserves. The major reason for our large CAD is that we have huge dependence on import of certain items like oil, coal and gold," he said.
The finance minister said that as the major world economies are in recession, "we cannot do much on the external factors."
"However, India continues to remain a desired destination for FDI and foreign instituional investors (FIIs)," he added.