'Limiting inflows to hurt competitveness'

Written by Reuters | Mumbai, October 29: | Updated: Oct 29 2007, 14:32pm hrs
US Treasury Secretary Henry Paulson said on Monday that India "for the most part" was on the right path to reduce risks from increased foreign investment, but warned that limiting capital flows would hurt the country's competitiveness.

In prepared remarks at an infrastructure conference in Mumbai, Paulson said restrictions on capital flows were "blunt instruments" that could have unintended consequences.

"I urge my Indian colleagues to continue, and accelerate, their efforts to liberalize the economy and develop the financial system -- to assure that the vibrancy and growth that the Indian economy now enjoys continues well into the future," Paulson said.

The comments were his first on capital flows since India last week announced new restrictions on anonymous investment flows into Indian shares, which have put upward pressure on the rupee in recent months.

"Limits on debt and equity financing, and asset allocation restrictions on financial institutions, are impediments to putting resources to their most productive use," Paulson said.