Chief Economic Advisor Raghuram Rajan on Tuesday pegged FY13 economic growth at 5.5-6.5 per cent, adding it would take a few years to record growth of eight to nine per cent. A three- to four-year growth revival plan was required, he added.
Rajan said apart from retail, other sectors, too, should be open to inflows. He, however, cautioned against inflows by foreign institutional investors, which could lead to volatility in capital markets. At this point, more foreign direct investment (FDI) was good, not in every sector, but in many sectors, Rajan said, adding he favoured raising the FDI cap in the insurance sector. “We have to be careful we are not overtly dependent on external investors …this is an environment when the external investor is quite fickle,” he said.
Rating agencies Standard & Poor’s and Fitch had earlier warned India’s ratings could be downgraded to junk. Rajan said India deserved an investment grade rating and credit rating agencies would look at the government’s medium-term plan and, hopefully, take the right decision.
The government, he said, would adopt measures to improve investment confidence, adding it planned to cut transaction costs in capital markets. He suggested small investors in capital markets diversify their portfolios. Allaying concern on the rupee, he said improved investor confidence would impact rupee valuations.
He stressed reducing expenditure was vital to cut fiscal deficit, saying moving towards the true cost of fuels was the right policy.
Rajan said, the National Investment Board would be set up soon to help clear delayed infrastructure projects.