The RBI’s move to contain the Nation’s burgeoning current account deficit by imposing a cap on outward investment would act against the Indian economy’s globalisation drive and hamper the overall reforms process, according to Kris Gopalakrishnan, president of the Confederation of Indian Industry (CII).
Terming the capital controls as retrograde, Gopalakrishnan said reduction of limits in outward investment from 400 per cent of net worth to just 100 per cent under the automatic route was a drastic step. Observing that outward investment by India has come down from $16.5 billion in 2010-11 to $7.1 billion in 2012-13, he said this would severely dent India’s strategic footprint in the global market.
At a time when foreign companies are searching for opportunities in resources 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, he added.