The Cabinet is likely to take up proposals to revise foreign direct investment (FDI) caps in various sectors by the third week of July, finance minister P Chidambaram said on Friday.
?FDI cap review may come up before Cabinet in third week of July,” the minister said after the meeting of the cabinet committee on economic affairs.
On Monday, a panel, headed by secretary, department of economic affairs, recommended a complete overhaul of India’s foreign investment policy by hiking FDI sectoral cap in sectors such as defence, telecom, public sector banking and broadcast media.
The panel suggested enhancing the sectoral caps under two categories. First, increasing the FDI cap from 26% to 49% and, second, from 51% to 74%. These broad categories are to be implemented across all sectors. The proposal to rationalise FDI caps are part of a larger policy to attract foreign direct investment to bridge the ballooning current account deficit (CAD).
Before the proposals come up before the Cabinet, Chidambaram will meet PM Manmohan Singh and commerce minister Anand Sharma next week.
Chidambaram also expressed unhappiness over the rupee movement, but said that there was no need for panic and the RBI will take action when necessary. “We are watching the situation. RBI will take whatever action it has to take. We have good economic advisors. We will do whatever has to be done … My request is you should not react in panic, its happening around the world,” the minister said.
The rupee had slumped to a record low of 59.9850 to the dollar on Thursday, following the US Federal Reserve’s statement on its plan to wind down the monetary stimulus.
The rupee has been one of the worst performing currencies in Asia following a global sell-off triggered by fears that the Fed might start tapering off its support for the economy. The currency tanked 1.4%, among Asia’s worst performers on a day that saw currencies tumble around the world
The Federal Reserve’s signal of a rollback in its monetary stimulus has raised fears that it may signal the end of cheap money, critical to funding India’s current account deficit that hit a record high of 6.7% of gross domestic product in October-December.
?We are unhappy over what’s happening. But that’s an impact that every currency in the world is facing because of certain announcements made by the US Federal Reserve.?
?Obviously that money which is being pulled out from all emerging markets will ultimately have to find a place,?Chidambaram said.
