India's business leaders have united to slam the latest move by the Reserve Bank of India to bring back capital controls by slashing the resident remittances limit and the amount companies can invest abroad to protect a down-spiralling rupee, calling the move ''retrograde.
Both the Confederation of Indian Industries (CII) and the Federation of Indian Chambers of Commerce & Industry (FICCI) today condemned the move, along with several individual industry leaders.
"The RBI's steps to contain the current account deficit by imposing a cap on outward investment acts against the Indian economy's globalization drive and detracts from the overall reforms process," said CII president Kris Gopalakrishnan.
He said the reduction of limit in outward investment through the automatic route from 400 per cent of net worth to just 100 per cent was too drastic a step.
Observing that outward investment by India has progressively come down from $16.5 billion in 2010-11 to $7.1 billion in 2012-13, CII said the new curbs would severely dent India's strategic footprint in the global marketplace.
''With such a minimal amount of outflows impacted, the gains to the rupee may in fact not be as much as expected. We are deeply concerned ... as it would disrupt ongoing investment plans,'' Gopalakrishnan said.
"The move would further vitiate investor confidence which is already low and would send a wrong signal that India is not a place for doing business. The long term credibility of the country would suffer as overseas businesses may have doubts about policy stability," CII said in a statement.
Naina Lal Kidwai, president of FICCI, said the market's fears over the fundamentals of the economy need to be addressed, and hoped that the recent measures to restrict outflows are temporary and would be reversed once there is stability in the foreign exchange market.
"With the rupee touching a new low of 62 for a dollar and the largest fall in two years in the equity market, a sense of despondency continues," Kidwai said.
"The markets today experienced a free fall and have not reacted well to the central bank's restrictions on rupee flows offshore with heightened fears that more restrictions may come, including on FIIs. These fears need to be addressed - after all India has never restricted dividend flows offshore or sales of equity share proceeds even when the situation was more dire," she said.
''Ironic that we have controls on capital on Independence Day. Feels like the 1980s. Well the silver lining is that I feel young again,'' said Anand Mahindra, chairman, Mahindra & Mahindra.