By Daniel Bases
NEW YORK (Reuters) - Finance Minister P. Chidambaram said on Wednesday he expected the current account deficit for the 2012/13 fiscal year that ended in March to be around 5 percent of gross domestic product.
"The third quarter (current account deficit) was large. The fourth quarter is likely to be better and for the overall year, probably around 5 percent, maybe a shade under 5 percent," he told reporters before meeting with investors and business representatives.
Chidambaram is in the United States seeking foreign investment for India's ailing economy, the third largest in Asia, and will also make his way to Washington for the annual spring meetings of the International Monetary Fund and World Bank.
"I am not looking at any number, nor am I here to sign any deals. The idea is to talk to investors. They are already invested in India," he said.
"The purpose is to make sure that they continue to remain invested in India and to increase their allocation to India."
India is seeking foreign investment to fund its record high account deficit, which hit an all-time high of 6.7 percent of gross domestic product in the October to December period, driven by heavy imports of gold and oil and by muted exports.
GDP growth hit a near-four-year low of 4.5 percent in the quarter ended in December, an enviable performance when measured against the paltry growth in developed markets.
Chidambaram said GDP estimates for fiscal 2013/14 are in a range of 6.1 percent to 6.7 percent.
"Beyond that, it is only an aspiration. In fiscal 2014/2015, we want to go above 7 percent. Fiscal 2015/2016, we want to go back to our potential growth rate, which is above 8 percent."
OPEN UP AND OUTFLOWS
Proposals under consideration for opening up the $1.8 trillion Indian economy include raising the cap on foreign investment in rupee-denominated government debt by up to $5 billion; reducing taxes on such investments; making it easier for Indian companies to borrow abroad; and easing curbs on foreign investment in sensitive sectors such as defense, telecommunications and media.
"There are many caps imposed at different points in time," Chidambaram said. "We have got a committee now to look at each cap and ask a question: Has the cap served a purpose? Does it continue to serve a purpose? If it does, let the cap continue. If it does not, then the cap should either be relaxed or removed."
He noted a report is due after a final meeting in mid-May.
"I think many caps deserved to be either relaxed or removed," he added.
Chidambaram's push for more foreign investment, however, could make India more vulnerable to sudden reversals in capital flows.
One indication of dispirited global investors has been the net outflow from Indian-focused equity funds, which at the end of March had about $68.3 billion in assets under management.
According to Thomson Reuters Lipper service, these mutual funds and exchange traded funds had net outflows of nearly $7 billion in calendar 2012 versus net outflows of $508 million in 2011. In 2010 there were net inflows of $1.5 billion and in 2009 $5.8 billion in net new capital was put to work in these funds.
For a graphic on India focused portfolio flows click http://link.reuters.com/mut47t
Acknowledging the portfolio outflows, Chidambaram countered that other types of investments are counter-balancing those trends.
"Not FII's (Foreign Institutional Investment). FII's are buying. The domestic institutional investors may be selling, but for every person who buys there has to be a counterparty to sell. Buying and selling is normal. As long as the cumulative flow into India continues to rise ... it is a secular rising graph," he said while drawing a picture of an upward trajectory in investment flows.
(Reporting by Daniel Bases; Editing by James Dalgleish and Andre Grenon)
