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Asserting that India can absorb $50-billion foreign investment annually, Finance Minister P. Chidambaram has said the downturn in Indian economy is temporary and the growth will return to 8 per cent in two years.
Acknowledging the largeness of the current account deficit (CAD) at around 5 per cent of GDP in 2012-13, he said the Government had no timelines or targets in mind for bringing it down. He expressed hope that softening of oil prices will help bring down CAD.
Addressing the international media here, Chidambaram said the Government was reviewing the sectoral FDI caps as many of them were imposed at different points of time.
“India is poised for a potential growth rate of 8 per cent and the country has not fixed the limit to foreign investments,” he said.
“We as a country can easily absorb $50-billion investments a year or more. In the hierarchy of foreign inflows, FDI ranks first followed by FII and external commercial borrowings. FDI is important to India too as in any other country,” he said.
Chidambaram, who met investors in Canada and US this week, said India’s downturn was a temporary phenomenon. “I agree that it’s a legitimate question but we have an answer.
“We will be back to 6 per cent in the current year. The fact that the growth in 2012-13 declined, it is not permanent and all the estimates show good upturn,” he said.
“I know the largeness of the size of CAD and we need to travel some distance before we are able to bring it to 2.5 per cent but that can happen in one year or two. CAD has no fixed numbers. Prudence tells us that CAD must be 2.5 per cent or so. There is no target date,” he said.
The fourth quarter, he said, was likely to be better and for the overall year, “probably around 5 per cent, maybe a shade below five per cent’’.
On gold prices in India and globally, the Finance Minister said they were indeed falling but was apprehensive that people may import more gold.
“We have a passion for gold and we have to live with it. Prices may fall but volumes may rise and we can’t make any predictions on this,” he said.
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