FDI imperative to address current account deficit: Chidambaram
Finance Minister P. Chidambaram has said that foreign direct investment was (FDI) is imperative to counter the country's current account deficit.
Addressing a seminar in Pune, Chidambaram said there is an opportunity for reforms in various sectors that must be seized.
"We need an additional 70 billion dollars, and we need to tap into the savings of another country. Look at the huge opportunity it creates for reforming several sectors of the economy. Firstly, you open up new sectors for foreign investment, because that is an imperative. Secondly, you must have a stable polity in this country, otherwise nobody will invest. You must have stable policies, especially tax policies," Chidambaram said.
India needs to increase its capital flows to plug a current account deficit that widened to a record high of USD 21.76 billion in the January-March quarter, and was cited as key reason behind the rupee currency's fall to a record low in mid-June.
Although the gap narrowed to USD 16.55 billion in the June quarter, allowing the country to run a small balance of payments surplus, it still remains above analysts' comfort levels.
Chidambaram said that there was a need to build consensus for reforms, calling for support from various ministries.
"I think the mere fact that today a ballooning current account deficit is a huge challenge, but I think it throws up opportunities. If sectoral ministers and sectoral departments look at the compulsions on us because of the current account deficit, I think huge reforms can be done in many sectors of the economy," he said.
India has thrown open its doors to foreign retailers this year, liberalising investment rules to allow in global supermarket chains and as well as lifting an investment cap on single-brand retailers.
But the rule changes have provoked a furious backlash from some political parties and domestic retailers, a reaction which threatens to derail a package of pro-market reforms aimed at reviving growth.