Chidambaram heads to US, Canada to drum up foreign investment

Finance Minister P Chidambaram will be visiting the United States and Canada in the coming week to drum up foreign investment.

According to media reports, finance ministry officials are working on a series of steps to attract at least 20 billion dollars in new investment to fund a record high current account deficit without depleting India's 300 billion dollars in foreign exchange reserves.

The proposals include raising the cap on foreign investment in rupee-denominated government debt by up to five billion dollars, reducing tax rates on such investments, making it easier for Indian firms to borrow abroad, and easing curbs on foreign investment in sensitive sectors such as defence, telecoms and media.

Chidambaram will meet foreign investors in New York, Ottawa and Toronto to talk up India as an investment destination.

The new push for foreign investment is seen as part of an important but potentially risky shift in how India approaches its widening current account deficit, which has emerged as the government's biggest economic worry.

India's current account deficit widened to an all-time high of 6.7 percent of GDP in October-December, driven by heavy oil and gold imports and muted exports.

India currently allows 76 billion dollars of foreign investment in sovereign and corporate debt.