Need to relax rules for more foreign investments: FM

Says price stability cannot be the only mandate of a central bank

There is a need to relax rules to attract more foreign investments, Finance Minister P Chidambaram said on Monday.

The government is considering all options including a sovereign bond sale and selling debt to non-resident Indians to attract dollar inflows, he said.

"All options are on the table," he said, while answering a question on a sovereign bond sale.

Govt is seeking higher foreign investments to fund the current account deficit, which hit 4.8% of the GDP in the fiscal year that ended in March. A swollen deficit has helped make the rupee the worst performing emerging Asian currency, which has been down over 9% since the beginning of May.

He further said that govt will not use reserves to finance CAD in FY14 and expected FY14 CAD to be in the same range as FY13 CAD.

Speaking ahead of the RBI policy meet tomorrow, Chidambaram said that price stability cannot be the only mandate of a central bank. It also needs to look at  growth and employment generation, he said.

On RBI's measures to tighten liquidity, FM said that he didnot expect the measures to result in hike in bank lending rates. He added that banks have assured him that they will fully meet the credit needs of the industry.

The measure to curb imports had effect in June, but imports had risen in July, said the finance minister, without giving details for the gold imports in tonnage or value terms for July.