New Delhi, Aug.17 (ANI): The Confederation of Indian Industry (CII) has come out strongly against the recent action to stem the slide in the rupee.
"RBI's step to contain Current Account Deficit by imposing a cap on outward investment acts against the Indian economy's globalization drive and detracts from the overall reforms process," said Kris Gopalakrishnan, President, CII.
Terming the capital control as retrograde, CII noted that the reduction of limit in outward investment from 400 per cent of net worth to just 100 per cent under the automatic route was too drastic a step. Observing that outward investment by India has progressively come down from 16.5 billion dollars in 2010-11 to 7.1 billion dollars in 2012-13, the CII press release said that this would severely dent India's strategic footprint in the global marketplace.
At a time when companies of other countries are searching for opportunities in resources, markets, and manufacturing across the world, India might lose out. With such a minimal amount of outflows impacted, the gains to the rupee may in fact not be as much as expected, added CII. "We are deeply concerned that such a measure would also prove to be counterproductive as it would disrupt the ongoing investment plans of corporates," added Mr Gopalakrishnan.
The move would further vitiate investor confidence which is already low and would send a wrong signal that India is not a place for doing business. The long-term credibility of the country too would suffer as overseas businesses may have doubts about policy stability.
To stabilise the rupee, it would have been more appropriate to initiate policies which prevent influx of non-essential imports such as coal and iron ore andaugment forex inflows by encouraging FDI by promising a conducive and stable policy regime and liberalizing FII by removing short term capital gains tax. It is hoped that the above measure would be temporary and the caps on overseas investment would be removed sooner rather than later, said the CII President.(ANI)