New Delhi: With the global financial crisis making liquidity scarce, the Indian government is looking at various options for attracting foreign capital into the country and is considering further easing of Foreign Direct Investment (FDI) norms. Commerce and Industry minister Kamal Nath said the cap on FDI could be increased in areas such as defense production. “We are working on the modalities right now,” he said speaking on the sidelines of a CII summit in the capital.
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The government may also lift export bans and re-impose duty on import of edible oil. Nath said prices of edible oil had fallen globally. “We need to maintain prices for farmers as well,” he said. The government had brought the duty on edible oil imports to 0% a couple of months ago to counter inflation in the country.
As the global turmoil gets more intense, Indian stock markets and the rupee too have been facing the heat. As foreign institutional investors or FIIs pull out on margin calls, putting pressure on rupee, the Reserve Bank of India has been in firefighting mode. Its forex interventions have cost it dearly. RBI data showed that its foreign exchange reserves fell by 5.65% or $15.5 billion to $258.4 billion for the week ended 24 October. This was the largest ever weekly fall in forex reserves ever.
FIIs too have been pulling money out of country and had taken out $7.3 billion till 10 October this fiscal, according to the RBI. In 2007-08, net FII inflows into India amounted to $20.3 billion.