Millennium Post

Must not compromise India’s national interest for FDI: Rajan

"The most stable form of financing, foreign direct investment, has the additional benefit of bringing in technology and methods. But India should not be railroaded into compromising its interests to attract FDI," he said in a commentary posted on the website of Project Syndicate.

He, however, did not elaborate on what he thought could compromise India's interest. Making a case for transparency in policies and resolution of "contractual" disputes, especially over taxation, Rajan said efforts to ensure this have already begun. India will run a current account deficit for the foreseeable future, which means that it will need net foreign financing, he said. Sustained growth in India requires lifting people out of poverty, fuelling infrastructure investment and a rethink on economic-policy approach, he said.

"If India is to succeed, it will have to deepen regional and domestic demand, strengthen its macroeconomic institutions, and join in the fight for an open global system. Diminished expectations abroad should not lead India to lower its ambitions," Rajan said.

Narendra Modi led government in its eight months in office has relaxed FDI norms in insurance railways, construction, defence and medical devices sector. Foreign inflows in the country rose by 22 per cent to $18.88 billion during the eight months of the current fiscal.
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