India may further raise caps on foreign direct investment to spur more inflows of funds, as part of efforts to kick-start the sluggish economy before next year's general elections, the finance minister said Thursday.
Finance Minister P. Chidambaram also appealed for calm over the rupee, saying steps have been taken to halt the slide in the currency, which hit new lifetime lows this week, in part on concerns over the Indian economy.
Chidambaram said the government was in the final stages of reviewing caps on foreign direct investment in a number of sectors, including defence, in a bid to attract overseas capital and speed up much-needed infrastructure projects.
"In June, you can expect a number of decisions taken and implemented that will accelerate reforms and spur investments in critical sectors," the minister told reporters in New Delhi without giving details.
The Congress-led government has been dogged by a string of corruption scandals during its second term in office, which has derailed efforts to push through promised pro-market reforms and revive the economy before elections in 2014.
The government last September reduced limits on FDI in various sectors from retail to aviation. But attempts to pass bills to open up the insurance and pension sectors to more overseas investment as well as simplify the process of buying of land for business have stalled.
Chidambaram launched a defence of his government's efforts to revive the staggering economy and boost investor confidence, one day after a ratings agency raised India's credit rating from negative to stable.
"Significant results have been achieved in the last nine months and I am looking forward to achieving more desired outcomes," he said.
Global ratings agency Fitch on Wednesday improved India's sovereign rating to stable from negative, citing steps taken to curtail the budget deficit, in a rare piece of good news for the Congress government.
Chidambaram said the economy was stronger than last year and the government would meet its spending targets and lower the public deficit, which ballooned to 4.89 percent of gross domestic product last year from 4.20 percent the previous year.
The government is forecasting growth of six percent this year after the economy grew at five percent last year, the slowest pace in a decade, hit by high inflation, a ballooning deficit and policy paralysis.
Chidambaram said there was "no reason for panic" over the falling rupee, which has been hit by robust US jobs data and concern about the South Asian economy.
"Steps have been taken to cure the currency's fall," he said.
"Countries with large current account deficits have taken a hit on their currencies. The rupee will regain losses suffered in the last few days."
But the comments largely failed to impress the market, with the rupee trading at 58.54 to the dollar after the speech, before closing higher. Analysts complained that the speech lacked specific measures.
"The market was expecting a cure-all. But the finance minister disappointed us," Navin Raghuvanshi, a currency trader at Mumbai-based Development Credit Bank, told Dow Jones Newswires.
The rupee skidded to a lifetime low of 58.98 to the US dollar on Tuesday, prompting India's central bank to intervene.
The minister ruled out any further hike in import duty of gold while urging Indians to shun the precious metal as an investment option. Gold purchases are one of the biggest contributors to India's hefty current account deficit -- the broadest measure of trade.