Economic Survey Lays Emphasis on FDI and FII Inflows

The Economic Survey 2012-13 presented by the Union Finance Minister, Shri P. Chidambaram in the Lok Sabha today has stated that as the room to increase exports in short run is limited, the main focus has to be on curbing imports, mainly by making oil prices more market determine and curbing imports of gold to contain current account deficit. At the same time, the Survey says, further measures to ease the inflow of remittances and steps to diversify software exports could help reduce financing needs. Greater emphasis on FDI including opening of sectors further can help increase quantum of safe-financing. Foreign Institutional Investors (FIIs) flows need to be targeted towards long-term rupee instruments so as to minimize the reversal of capital during risk-off phases. Finally, the Survey observes, external commercial borrowing needs to be monitored carefully so that entities without access to foreign exchange revenues do not leave significant exposures unhedged.

The Survey observes that widening trade deficit and Current Account Deficit (CAD) crossing 4% of GDP in 2011-12 and the first half of 2012-13 have been matters of concern. The Survey further says that in recent years, net invisible balance reduced the need for financing while capital inflows were sufficient to finance the CAD. The Survey notes that in the current fiscal the growth in invisible is insufficient to narrow the growing trade deficit besides the CAD financed by volatile capitals flows has led to financial fragility and is reflected in rupee exchange rate volatility.

Source : Equity Bulls

Keywords