More FDI reforms on anvil, says Manmohan

Pegs CAD at around 5% for full 2012-13

After liberalisation of the foreign direct investment (FDI) regime for the retail and aviation sectors last year, Prime Minister Manmohan Singh today announced more FDI reforms were on the cards.

He also promised reforms in the financial sector. This, he said, would be after careful consideration of a finance ministry panel report that suggested, among other things, a unified regulator instead of Sebi, PFRDA, Irda and FMC that could eventually merge even RBI with it.

In September last year, the government had announced a slew of liberalisation moves, including allowing up to 51 per cent FDI in multi-brand retail, diluting sourcing norms for 100 per cent FDI in single-brand retail and permitting foreign airlines to invest up to 49 per cent in Indian ones.

“The liberalisation of FDI in multi-brand retail, civil aviation and other areas is an important signal. We are reviewing the FDI policy comprehensively to see what more can be done,” Singh said after inaugurating the annual general meeting of the Confederation of Indian Industry (CII).

He said the reforms would help the economy finance the current account deficit (CAD), which might decline only modestly initially in 2013-14.

He pegged India’s CAD at around five per cent of gross domestic product (GDP) in 2012-13, a record. In the third quarter, it had stood at an all-time high of 6.7 per cent, widening the deficit in the first nine months of the financial year to 5.4 per cent. The prime minister’s assessment, therefore, hints at CAD coming down in the last quarter from its third-quarter peak.

He said the deficit, in absolute terms, could stand at over $90 billion in 2012-13, compared with $78.2 billion last year.

“We financed a CAD of over $90 billion in 2012-13 without a loss in (forex) reserves. We will take all steps to ensure inflows remain strong for the next two years,” Singh said.