| Date: |
01-11-2012 |
| Subject: |
Need FDI to cut current account deficit: FM |
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Asserting that country’s debt must be sustainable, finance minister P Chidambaram said it was imperative for India to attract more foreign direct investment so that the economy did not rely on borrowings to meet widening current account deficit.
“The FDI is not an option, but an imperative, failing which we will have to rely on borrowings to meet the current account deficit,” Chidambaram told the parliamentary consultative committee on finance seeking the support of political parties to contain twin deficits, on fiscal and current account.
The opening up of multi-brand retail sector to FDI sparked off an uproar among several political parties and there is resistance to government proposal to raise FDI cap in insurance to 49 per cent and allow up to 49 per cent in pension funds.
The insurance and pension reforms require legislative changes and these bills are to be taken up for passage in the winter session Parliament beginning on November 21. Government had said without raising FDI cap on insurance, the $6-10 billion investment required in the sector might not be forthcoming.
India’s fiscal deficit shot up to 5.8 per cent against budgeted 4.6 per cent of GDP and current account deficit swelled to $78.2 billion at 4.2 per cent of GDP in 2011-12. This year, fiscal deficit is to be brought down to 5.3 per cent of GDP and CAD to $ 70.3 billion at 3.7 per cent of GDP.
Fiscal deficit during April-September rose to Rs 337,000 crore or 65.6 per cent of total estimated for full financial year, government data showed on Wednesday. During the same period, a year ago, the deficit was 68 per cent of the budget target.
“Debt of a country must be sustainable and should be within the limits. No country can live beyond its means. The countries which have accumulated un-sustainable level of debt are facing economic and financial problems,” he was quoted as saying by a finance ministry statement on Thursday.
He said that the best efforts would be made to contain fiscal deficit at 5.3 per cent of GDP during the current financial year even though the Kelkar Committee has stated that as per the current trends, it could be 6.1 per cent.
He said though the target of 5.3 per cent is “challenging one, yet it is doable”. The strategy to achieve the target would be to maximize revenue collections and control expenditure. He had unveiled a five-year fiscal consolidation roadmap on Monday.
Source : .mydigitalfc.com
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