, NEW DELHI, Jan 1 – India aims to throw open its doors wider to overseas investors, a minister said Wednesday, as it seeks to spur a slumping economy before the general election.
The government has already relaxed foreign direct investment (FDI) rules in such sectors as civil aviation, retail, telecommunications, defence and oil refineries to loosen shackles on the long-protected economy.
“The government will continue its endeavour for liberalising FDI policy further in the coming weeks… for attracting foreign investments,” Commerce Minister Anand Sharma said.
India is struggling to increase its attractiveness to overseas business to buttress a weak rupee and to support growth with the election due by May. But political opposition has made economic liberalisation a stop-start process.
Five percent annual growth — the slowest in a decade — a string of graft scandals, suffocating bureaucracy and project approval delays have soured the investor mood on Asia’s third-largest economy.
But in a vote of confidence in India’s long-term potential with its increasingly affluent consumers, FDI interest has shown signs of picking up lately.
Earlier this week the foreign investment regulator cleared plans by British retail giant Tesco and Vodafone, the world’s largest mobile phone operator, to invest over $1.5 billion in India.
“The bold decisions of the government (to liberalise the economy) have resonated with the global community and we have seen results in the last few months,” Sharma said in a New Year’s Day message.
Officials say the government is now looking at relaxing a ban on FDI in the cash-hungry dilapidated railways, one of the world’s largest networks, and improving lines to ports and industrial hubs that would boost productivity.
Still, an investment turnaround could be some way off. Between April and October of this financial year, FDI slid 15 percent to $12.6 billion from a year earlier, official data showed.
Meanwhile, foreign institutional investors pumped in around $20 billion into financial markets in 2013, down from $24 billion in 2012, according to a chamber of commerce study.
India’s immediate economic prospects remain downbeat, analysts add. Ratings agency ICRA called the government’s fiscal situation “gloomy” after New Delhi said it used up 94 percent of its borrowing limit by November.
ICRA said more spending cuts that could slow the economy further will be needed to meet the government’s fiscal deficit target — the gap between spending and revenue — of 4.8 percent of gross domestic product for the financial year to March.
Finance Minister P. Chidambaram insists the goal is a “red line” that will not be breached.
Underscoring the economy’s fragility, output from eight key industries ranging from coal to steel, edged up by just 1.7 percent in November from a year earlier compared with 5.8 percent growth in the same month of 2012, data showed.
The ruling national Congress party, recently routed in four state polls, is desperate to make headway in breaking the economy out of its state of “stagflation — high inflation and weak growth — before the May vote.
“The new government will inherit an economic mess. It will have to set its fiscal house in order, keep its eye on inflation, rebuild confidence, push a new reforms agenda and get investment activity in the private sector on track,” said Mint business newspaper in a front-page essay.