At a time when the rupee is appreciating against the dollar on rising capital inflows, the government on Thursday said high flow of foreign investment should not be restricted even if it leads to some problems.
"There are of course some problems associated with copious flow of foreign investment, but that cannot become a ground to reject foreign investment," Finance Minister P Chidambaram said at a CII function in New Delhi.
He said the country should learn to manage the flow of foreign investment as was being done by China.
"We must learn to manage these inflows, but we must not do anything that will restrict investment - domestic and foreign and both private and public," he said.
Rupee rose for the fourth consecutive day on Wednesday to 40.56 against the dollar as global funds increased purchases of local equities. "The rupee's rate is directly related to capital flows we are seeing," an analyst said.
The Indian currency has appreciated nearly 14 per cent since August 2006. Although it is hitting exporters, the Reserve Bank has refrained from taking steps to stop the rise as this also makes imports cheaper and helps check inflation.
The government, howerver, did tighten the flow of foreign funds recently, restricting External Commercial Borrowings by real estate companies.
It had barred companies to raise ECBs for developing integrated township, built on at least 100 acres of land. It had also made it difficult for small players to raise ECBs by lowering ceiling on interest rates to be paid on such debts.
The move was aimed at slowing down flow of foreign debt into the real estate sector, Chidambaram had said earlier.