MUMBAI: Reserve Bank of India deputy governor BP Kanungo indicated a possible easing of regulatory regime in favour of capital flows, in order to encourage investment inflows into the country.
Kanungo, speaking at the FEDAI annual conference at Beijing on April 19, stressed on India’s huge investment needs and said, “The world today is flush with long-term savings in the nature of pension funds and corpus of insurance firms; our policy regime need to be nimble and accommodative enough to direct these to productive ventures in India. We are working towards this.”
Pointing out to the 20 years since the last foreign exchange act FEMA was implemented, Kanungo said the policy changes since then in terms of foreign direct investment, external commercial borrowing, trade deficit etc have been mostly rationalisation and consolidation rather than a significant change in stance. Investments in physical and social infrastructure have long-term funding needs.
He said anecdotal reports seem to suggest that in the last few years, investment by venture capital and private equity funds constitute about 35-40 per cent of FDI inflows. “Perhaps there is a need to consider private equity investment in its totality and see if a modulation of policy regime is warranted,” he said.