Inviting American companies to invest in India’s infrastructure and defence industries, through the public-private-partnership route, Prime Minister Manmohan Singh today said India would bridge a higher current account deficit through increased foreign direct investment.
Addressing the US-India Business Council (USIBC) in Washington DC on Monday, the prime minister said: “A strategy of high investment in the face of modest export growth may require us to run somewhat larger current account deficits than we otherwise would. This raises the issue whether we can finance the current account deficits with long term capital flows. I believe we can. India’s current account deficit is around 1 per cent of GDP at present. It may need to increase to 2.5 per cent of GDP to finance the enhanced infrastructure investment strategy I have in mind. This is not too large a deficit to finance through additional long term flows, including foreign investment. Indeed, with the industrialised world projected to grow more slowly, capital will need to look for profitable opportunities abroad to earn a high rate of return. A fast growing India will provide precisely that opportunity.”
The prime minister assured his high profile CEO audience that India would push ahead on key reforms in several areas, “especially those aimed at bringing the deficit under control while ensuring a strong expansion in investment in infrastructure.”
Stating that the government was committed to reducing the fiscal deficit, he said a Goods and Services Tax would soon be introduced. Reiterating India’s commitment to financial sector reforms, he added, “We have started a programme of disinvestment. Legal reforms aimed at reducing delays are another priority. We are also committed to major reforms in education and skill development, which are crucial for achieving inclusive growth.”
Outlining India’s National Action Plan for Climate Change, Singh said India would take many new initiatives in energy efficiency and clean energy. “These are areas where your companies are leaders in the field, and we should explore possible areas of cooperation. We plan to sign with the US government tomorrow a Memorandum of Understanding on Energy Security, Clean Energy and Climate Change. This will provide a framework for pursuing bilateral cooperation in specific areas.”
