The government on Tuesday said it was examining the proposal to increase foreign direct investment (FDI) ceilings in various sectors including defence. The government also indicated that it was preparing to announce a series of measures to attract foreign investments into India.
“The intent is to expand the cap wherever possible, including defence... The proposal for defence is being examined,” chief economic advisor to the finance ministry Raghuram Rajan said.
India opened up the defence equipment industry to the private sector in May 2001, but restricted foreign participation to 26% in this capital-intensive sector.
The government is likely to announce a string of steps aimed at boosting foreign fund flow to India and pep up the rupee in what looks like an action-packed part second round of reforms in the coming months.
The set of new measures will likely make it easier for foreign institutional investors (FIIs) to invest in India’s corporate and government bond markets, said a government source who did not wish to be identified.
“Increasing the growth rate is what we intend to do. And, overtime the measures that have already been taken will also start kicking in, which will increase the growth rate,” Rajan said.
India’s economic growth crashed to a decade-low of 5% in 2012-13, with gross domestic product (GDP) grew by a moderate 4.8% during January-March.
The government is not satisfied with the growth March quarter, Rajan said and hoped that good Rabi crop and accelerated government spending would catapult growth. “There are a number of pieces of legislations which has to be passed. If we can summon up for the passage of GST, insurance and companies bills, that could be a signal to domestic and external investors that there is a forward movement. So legislations help growth by enhancing investor confidence,” Rajan said.