More FDI must for fund requirements

Written by fe Bureau | New Delhi | Updated: Feb 27 2011, 04:26am hrs
The government must encourage greater FDI inflows to meet capital requirements, the Economic Survey has said, given that domestic savings were not enough to meet the capital requirements.

While underscoring the importance of a more liberal FDI regime, the survey acknowledged that the government since 2000 has gradually simplified and rationalised the FDI policy, adding a substantial number of sectors that are automatically allowed 100% FDI. Since 1991, when the economy was opened up to foreign capital, total FDI inflows was $136.8 billion up to May 2010.

The survey highlighted that for the country to reach the next phase of growth, it has to embark upon reforms on several fronts in industrial production to have a sustained double-digit output. Over the medium to long term, to sustain double-digits output growth and reduce the vulnerabilities of the sector, there is a need to put in place a policy framework for embarking on another round of multifaceted reforms, the survey noted.

While highlighting that the domestic economy showed signs of a turnaround after the slowdown led by automobiles, textiles, food and metal products, it the survey also raised concerns over the slower pace of growth in manufacturing. It said that India could learn from South Korea and China on how to attract foreign capital and set up research and development units.

The overall production of the six core sectors that include crude oil, petroleum refinery products, finished steel, electricity, cement and coal has marginally gone up during the current fiscal. However, there still remained a huge gap in capacity building in these sectors.