ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Genuflecting to Finance Capital

The very survival of the government depends on its blind acceptance of neo-liberal articles of faith.

What is good for foreign portfolio and direct investors, and, of course, India Inc, is good for India’s 1,210 million people. The smooth-talking, top-notch corporate lawyer, presently union finance minister, P Chidambaram, is in North America peddling the liberalisation of the norms for foreign portfolio investors in government securities and corporate bonds, as also promising an impending easing of the caps on foreign direct investment in businesses such as pension funds and insurance. He is on a so-called roadshow – was in Toronto on Monday (the 15th of April), Boston on Tuesday, and then onward to New York City on Wednesday, as we pen these lines. But why create so much buzz about foreign investment, one might want to know?

Released by the Reserve Bank of India towards the end of last month, the third quarter (October-December) balance of payments (BoP) data of the financial year just gone by is troubling. The country’s current account deficit (CAD) has widened from 4.4% (partially revised) of the gross domestic product (GDP) in the corresponding quarter of 2011-12 to 6.7% (provisional) of GDP in 2012-13. And, if one aggregates the BoP data of the first three quarters of 2012-13, the CAD has gone up quite significantly from 4.1% of GDP in 2011-12 to 5.4% in 2012-13. Indeed, if one takes the full-year figures that are available, the CAD has gone up from 2.7% of GDP in 2010-11 to 4.2% of GDP in 2011-12, and will certainly be above 5% for the full-year 2012-13 just gone by.

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