Foreign investment inflows to double to $60 billion in FY14 on Modi wave: Assocham

Banking on huge expectations from the incoming Modi Government, Indian economy could see doubling up of foreign investment inflows- including FDI and FIIs- to above $60 billion in the current financial year than $29 billion in the fiscal 2013-14, according to projection of ASSOCHAM study. The study, further pointed to a scenario of easing of prices and lowering of interest rates, the two major challenges that the Indian economy had been facing for some years now. However, it highlighted the new challenges that the emerging situation could bring for Reserve Bank of India (RBI) to deal with i.e., the problem of plenty on its impact on the Rupee rate inflation from the increased amount of cash into the system. Assocham underscored the need of new Finance Minister and RBI being on the same page in dealing with this scenario which would see Rupee appreciation and a further improvement on the current account balance and the ‘problem of plenty’ forcing RBI to sterilize the inflows by injecting cash into the system. It suggested dealing with this kind of situation by first removing import restrictions and customs duty on imports of gold since these were taken in extra-ordinary situation, which is now  a matter of past. A measure which would also bring some relief to gems and jewellery trade and industry and a first investor friendly step that can be taken in first Budget of the Modi Government. Additionally, ASSOCHAM noted that if Modi Government was successful in implementing some reform-friendly measures along with taming inflation and earning goodwill of the people, the FDI will do a fast catch-up with the FIIs. Typically, since the FDIs are long-term commitments, there would be a lag, the paper noted. The paper projected the FII investment to remain more than the FDI inflows in the current fiscal. According to expectation, while FII investment in both debt and equity could exceed $35 billion, the FDI money could be above $ 25 billion.