New Delhi: A day after RBI hiked bank rates, Prime Minister Manmohan Singh on Tuesday meet senior Cabinet minister to discuss the proposal to increases foreign investment caps in sectors like telecom, retail and defence.
The government is firefighting to steady the economy - with the slipping rupee, falling industrial output and rising inflation. All ministers heading economic and infrastructural ministries were present at the meeting.
The government is keen on increasing FDI ceilings to attract more overseas investments and finance the widening current account deficit (CAD). CAD reached 4.8 per cent of the GDP in 2012-13 as against the RBI's comfort level of 2.5 per cent. High CAD puts pressure on the domestic currency and can expose the economy to balance of payments problems.
A government panel headed by Arvind Mayaram had recommended 49 per cent FDI in most sectors through automatic route. The panel had also recommended hiking the FDI limit in telecom, defence and multi brand retail. A decision will clear the way for over 20 FDI proposals in crucial infrastructure sectors.
Mayaram committee's suggestions could include hike in defence FDI to 49 per cent from 26 per cent. However, Home Ministry has raised serious concern over hiking FDI cap in defence, space, and telecom.
FDI limit in telecom is likely to be raised to 100 per cent from 74 per cent at present.