Steady FDI is preferable to hot money from FIIs, says Rajan

  • PTI, New Delhi
  • |
  • Updated: Sep 25, 2012 22:54 IST

Cautioning against over-dependence on foreign institutional investors (FIIs), which brings in hot money, chief economic adviser Raghuram Rajan on Monday said the government should focus on foreign direct investment (FDI) and open more sectors to such inflows.

“We have to be careful that we are not overtly dependent on external investors that this is an environment when the external investor is quite fickle,” Rajan said in his first media interaction.

Betting high on the government’s reform initiatives, foreign investors have pumped in more than Rs. 9,000 crore (about $1.7 billion) in the equity market this month.

“The safest form of financing is through FDI, without any doubt because it’s long term... If you can make more financing through FDI, you are safer and so to the extent we can open up more to FDI... There will be efficiency, because there will be more competition in local economy,” said Rajan.

He also underlined the need for aligning domestic petroleum prices with global rates with a view to reducing subsidies and containing fiscal deficit.


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