Chidambaram keen on further liberalisation of FDI norms

In a clear indication of his pro-liberalisation stand, union finance minister P Chidambaram today said he wanted to remove or relax "outdated" caps on foreign direct investment (FDI) in various sectors.

With India posting its weakest GDP growth in a decade at 4.5 per cent in the last quarter, Chidambaram said removing investment barriers, many of which date back to before India started opening up its economy in the early 1990s, has been a key to the government's push to restoring investor confidence.

"Many of these caps are outdated. I think across the board many of these caps can be removed or certainly relaxed," Chidambaram told a TV channel.

Chidambaram did not elaborate, but the government has previously said it plans to open up the pensions sector to foreign investors, and raise the investment limit in the insurance sector to 49 per cent from 26 per cent. However, both these measures need parliament's approval.

The government has also discussed other reforms such as raising the investment caps in the defence industry, and in the print and electronic media.

Chidambaram said increasing FDI flows was vital to narrow the current account deficit, which has swelled as the country suffered a sharp fall in the export of merchandise goods for much of the past fiscal year.

Inflows of FDI fell 34 per cent to 23 billion in the 2012 calendar year, putting more pressure on the country's current account deficit (CAD), which has hovered around record highs and has worried both policymakers and investors.