FM Hints At FDI Tweak To Boost Core.

NEW DELHI: The government is considering measures to further ease flow of foreign direct investment (FDI) into infrastructure that is seen as the main driver of India's economic growth, finance minister Pranab Mukherjee said on Friday.

The government aims to spend more than $1 trillion in building and repairing the country's ports, airports, highways and other infrastructure over the 12th Five Year Plan beginning in 2012.

"Discussions are underway to also liberalise the FDI policy," Mukherjee said at a meet organised by the International Institute of Finance here.

The statement comes in the backdrop of a sharp fall in FDI flows in 2010-11. Investment in India fell by 23% to $16 billion between April and December last year.

The country needs long-term flows not just to meet its infrastructure funding requirements but also to finance its widening current account deficit, which has been projected at 3.5% of the gross domestic product (GDP) for 2010-11.

Mukherjee said the sustainability of the country's growth momentum in the medium term depended on the quality as well as the pace of infrastructure development.

He said the 8% growth achieved by the economy during 2009-10 came on the back of the stimulus provided by the government to tide over the global slowdown.

"This growth... vindicates the expansionary fiscal and monetary policy stance adopted during and after the economic slowdown in the second half of 2008. The economy is thus back to its pre-crisis growth momentum," he said. India's GDP is expected to expand by 8.6% in 2010-11.

Political unrest in some countries of West Asia and north Africa has pushed global crude prices to $116 a barrel, its highest since 2008.

"..the possibility of the global commodity inflation cutting short the economic revival in these (developed) countries cannot be ruled out," Mukherjee said.

He said although recent data shows some signs of improvement in the US economy as well as that of Europe, yet the risks remain.

".. there is also the danger of sovereign debt crisis in peripheral Euro-zone countries spilling over to financial markets," Mukherjee said. He, however, expressed optimism that the world economy will do better in 2011.

The finance minister said his government has improved its fiscal position by lowering market borrowings in the ongoing financial year to boost private investment and help reduce the public debt ratio.

"I have brought the fiscal deficit down to 5.1% of GDP in 2010-11 and pegged it at 4.6% in 2011-12, which improves on our earlier targets," Mukherjee said.

Source : economictimes.indiatimes.com