FM vows more reforms, may lift FDI cap in some sectors by July

New Delhi: Terming the sudden outflow of USD 5 billion as “unfortunate”, Finance Minister P Chidambaram today said there should, however, be no room for pessimism as fundamentals of the economy are intact and government is moving ahead on the reforms path.

The Minister further said the government will take a call on revising the FDI caps in different sectors in the second or third week of July.

“Among the large emerging economies, we are the fastest growing economies next only to China and therefore I am confident that money will flow back into India. Investors will find India a safe destination to invest. And this temporary phase should pass. There is no need for pessimism”, he told reporters on the sidelines of a Crisil function.

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Replying to a question on declining value of rupee, the Minister said, as much as USD 5 billion went out of India within two weeks of the statement by US Federal Reserve Chairman Ben Bernanke which was “completely misunderstood”.

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“The rupee is very stable. A large amount of money flowed into India. Between January and May alone, I think a little over USD 5 billion flowed into India. (But) following Bernanke’s statement, USD 5 billion flowed out of India in a matter of two weeks. This is unfortunate”, he said.

The rupee touched all-time low of 59.98 to a dollar last week following Bernanke’s statement that the US government could slowdown purchase of bonds, depending on economic condition, later this year. Today rupee closed at 59.66.

Besides reviewing the FDI caps, the government will be taking some key decisions in the coming days, Chidambaram said.

“All these points to an economy on the move…government clearly is committed to the path of reforms. So I think we should not spread pessimism or panic. The money will flow back into India. I think things will settle down”, he added.

Chidambaram said the rupee, which depreciated from Rs 45 to Rs 55 to a dollar in 12 months from August 2011 to July 2012, remained “remarkably stable” at Rs 54-55 till May 2013 and “I was very happy”.

“Nothing has changed in the fundamentals of the economy. Whatever its strengths, weaknesses, nothing changed in the 20 days of June. Yet money has flowed out… My appeal to investors is (that) the Indian economy is not any weaker after Bernanke’s statement…nor was it weaker just before Bernanke’s statement,” he said.

The government, he said, was pursuing stalled projects and more action would be taken to resolve contentious issues in the next two weeks.

“In about two weeks you will see the effects of pushing off stalled projects. (We) have taken important decision on coal pricing, on exit for road sector for those concessionaires who are not able to carry forward (the project),” he added.

Replying to queries on revision of FDI caps, the Finance Minister said the DIPP should consult other concerned ministries and department at the earliest and bring a note before the Cabinet.

“I think there will be an informal discussion before the note is formally brought to the Cabinet, but as I said the timeline is roughly the second or latest by third week of July. We should have revised FDI caps, revised FDI policy by the second or third week of July,” he said.

Referring to farm production, the Minister said, “we have a very good monsoon ahead of us… abundant food grain stock, the prediction for rabi and kharif (crop) this year… It would be the highest ever so far.”

Earlier, Chidambaram launched Crisil Inclusix, an index that measures progress in financial inclusion across the country. Crisil has developed this index as part of its corporate social responsibility agenda, with support from the RBI and the Ministry of Finance.

PTI