As India's policy makers struggle for options to halt the slowdown in the Indian economy, a parliamentary panel on Thursday asked the government to review the foreign direct investment (FDI) policy to attract overseas capital.
"Since inflow of additional resources in the form of FDI is crucial in financing India's huge investment requirements, the investment climate of our country has to be improved considerably to attract FDI in areas like infrastructure, high technology and export oriented sectors," the Parliamentary Standing Committee on Finance headed by former finance minister and BJP-leader Yashwant Sinha said in a report titled Current Economic Situation And Policy Options.
Stung by surging criticism of policy paralysis, the government is expected to announce a series of reformist measures in the next three weeks.
India's economic growth fell to 6.5% in 2011-12, and 5.3% during January-March this year, the worst in 9 years, and economists believe that the April-June quarter could be worse.
Data for the same will be released on Friday.
Last year, political compulsions that have forced the government into bottling up reforms initiatives including FDI in multi-brand retail, aviation and pensions.
"The committee, therefore, recommends that the FDI policy may be reviewed by the government to make India an increasingly attractive and investor-friendly destination for foreign investors," the report said.
The committee, however, expressed concern over the lack of coordination between fiscal and monetary policies and asked the government to take urgent steps to supplement the Reserve bank of India's initiatives to contain inflation and trigger growth.
"There is a visible lack of sync between the fiscal and monetary policy being followed by the government and the RBI ... the committee strongly feel that monetary policy alone cannot bring down inflation or spur growth in the absence of commensurate fiscal measures," it said.