The Hindu Business Line : `Govt must focus on foreign direct investment'

The Government should focus on foreign direct investment, as a source of investment for achieving higher GDP growth and infrastructure development, according to Confederation of Indian Industry.

Particular emphasis needs to be given to the FDI, as there exists a great potential to increase its magnitude and it also brings with it the required expertise as well as technology. The chamber noted that the current inflow of FDI is in the order of one per cent of GDP. It believes that favourable global environment should see the country targeting about 2.5 per cent of GDP as FDI.

MOBILISING Investments

The economy can clock an average of 9.5 per cent average growth in 11th Plan period if a capital investment of $1.5 trillion is made in the period.

The chamber expects the incremental capital output ratio for the plan period to witness a slight deterioration to 3.8 per cent from the current level of 3.6 per cent, he said. But this decline will be compensated by an increase in investment to GDP ratio on an average to 36.2 per cent from the current level of about 30 per cent.

Therefore, the crucial issue will be to mobilise the required investment for the purpose, which is still within reach if handled with skilful planning, added the CII President. At current rates and with no changes, the economy would probably manage about $966 billion over the next five years, according to a study by the chamber.

Further, investment in infrastructure has not kept pace with the rest of the sectors. Given the poor state of infrastructure, investment should be stepped up, according to CII.

According to a study, over the next five years a cumulative of $337.5 billion is required to be invested in infrastructure in order to achieve an average of 9.5 per cent GDP growth for the 11th plan period.

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