Government monitoring investments flows in some sectors: NSA

Mumbai: The government is monitoring investments in certain sectors to ensure the recent spurt in overseas capital inflows do not pose a security threat to the country, national security advisor M K Narayanan told reporters in Singapore.

"We are looking at certain investments in certain sectors," said Narayanan, who is accompanying the prime minister for the ASEAN summit.

While such inflows were natural in a globalised world, Narayanan said a meeting of relevant security agencies would be held shortly in this regard. He did not elaborate.

Finance minister P Chidambaram had also said earlier that India was facing the problem of a huge capital inflow and needed appropriate regulations as well as risk management systems to avoid any potential shocks.

"Today in India, we face a problem of enormous capital flows. This is a completely new situation for us. We welcome capital but we must learn how to manage capital, how to absorb capital," he told the Fortune Global Forum in October.

Foreign institutional investments into India surged to a record $17 billion this year. FIIs pumped in nearly $8 billion in October alone after the US Federal Reserve cut its key rate on September 18.

During April-July this fiscal India received FDI of $6.6 billion against $3.7 billion in the same period a year ago. Huge inflow of capital has pushed up forex reserves to $270 billion, and also led to a 12.5 per cent rise in the value of the rupee against the US dollar in 2007.

Of late, there have been huge investment inflows into India from China and the Middle East through private equity players such as Blackstone.

A lot of other private equity companies are also flocking to India to tap its rising investment potential.