New Delhi: Finance Secretary Arvind Mayaram has said the country would prefer the foreign direct investment (FDI) route to foreign institutional investment (FII) in stock markets if overseas resources need to be generated to spur economic expansion.
"I believe our potential growth rate is 8 per cent. And to get there, we need to develop resources. And that which we cannot generate domestically must come from outside and if it comes from outside, then we prefer it in the form of FDI rather than FII," Mayaram said.
While FDI flow is considered to be more stable since it is a long-term investment by corporates generating jobs, FII inflow into the stock market is considered hot money that can leave suddenly.
Mayaram said that India is getting adequate FDI to meet its requirement of capital expansion growth despite swing in its rates over the years. “
Mr Mayaram said that India is getting adequate FDI to meet its requirement of capital expansion growth despite swing in its rates over the years. “I believe our potential growth rate is 8 per cent. And to get there, we need to develop resources. And that which we cannot generate domestically, it must come from outside and if it comes from outside then we prefer it in the form of FDI rather than FII,” Mr Mayaram said at the launch of UNCTAD's World Investment Report 2014.
Mr Mayaram said, “Investments come if there are opportunities to make profits. Opportunity to make profits can only happen when growth is higher and economy becomes robust”.
He also said that the Modi government's maiden budget will be "growth-oriented" with some "major changes" in policies to lift the economy to a growth trajectory.
There are speculations that the government may give a boost to infrastructure spending, rationalize the subsidies and remove the irritants in tax policies to shore up revenue and instill confidence among investors.
"You must remember that investment doesn't come because of agreements like Bilateral Investment Promotion and Protection Agreements. Investment comes if there are opportunities to make profits. Opportunity to make profits can only happen when growth is higher and when the economy becomes robust," he said.
Earlier during the month, the Prime Minister's Project Monitoring Group (PMG), a committee to track stalled mega investment schemes, has cleared 147 projects, entailing an investment of around Rs 5 lakh crore. PMG has identified over 435 stalled projects worth around Rs 20 lakh crore, have been stuck due to delays in clearances and foreign investors turned averse due to retro tax rules and GAAR.
