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The country’s economy was capable of absorbing $50 billion in foreign direct investment (FDI) a year, Finance Minister P Chidambaram said on Monday, adding the government was committed to reforms to tackle the large current account deficit.
Addressing a news conference during a visit here to promote India as an investment destination, Chidambaram also reiterated growth in Asia’s third-largest economy was expected to accelerate in the current financial year and the economy was expected to grow 6.1-6.7 per cent in 2013-14.
“FDI flows into India are quite positive... I think we can easily absorb $50 billion of FDI every year into India,” added Chidambaram .
India's financial account, which includes foreign direct investment, portfolio investment and overseas borrowing by Indian companies, showed a surplus of $31.1 billion in the December quarter for financial year 2012-2013.
"A new trade policy will be announced in three or four days and that will show we are committed to reform," he added.
Chidambaram said the proposed BRICS Bank to finance development projects in emerging economies will not compete but complement the operations of the existing multilateral lending agencies.
The current account deficit widened to a record high 6.7 percent of gross domestic product (GDP) in the December quarter, driven by heavy oil and gold imports and muted exports, in a worse-than-expected performance that will keep the rupee currency- under pressure.
The government has previously said it plans to open up the pensions sector to foreign investors, and raise the investment limit in the insurance sector to 49 per cent from 26 per cent.
"The current account deficit is indeed large and a matter of concern," said Chidambaram. "For 2012-13 (it) has been fully financed by foreign exchange inflows, without touching our foreign exchange reserves. In fact we may have even added to our foreign exchange reserves," he said.
Chidambaram also said that the Indian economy was expected to grow 6.1-6.7 percent in the current fiscal year, an improvement on the estimated 5.0-5.5 percent growth recorded last fiscal year, a figure the minister said he was not satisfied with.
