'Use savings wisely, open up to FDI'

NEW DELHI: The country needs to mobilise domestic savings more efficiently besides easing foreign direct investment (FDI) norms to spur investment and sustain growth, according to global business leaders who deliberated on private capital flows at the India Economic Summit on Monday.

Currently, the bulk of India���s investments is funded through domestic savings. Estimated at $400 billion, this is more than a third of the gross domestic product (GDP). The inflow of FDI, which represents investments made in the country by foreign companies, accounts for less than 2% of the GDP. Even in 2007-08, which was India���s best year in terms of foreign investment inflows, FDI stood at around $15.5 billion.

MCX Stock Exchange chairman Ashok Jha said, ���Domestic savings should be channelised productively. If more people participate, India���s growth rate will be much higher.��� Echoing the sentiment, Bank of America Merrill Lynch country head (India) Kevan Watts said, ���Reforms have to make the financial system recycle Indian capital more efficiently.���

Although the bulk of domestic investments is financed through household savings in India, foreign capital, too, has a critical role to play. Besides contributing to the overall funds available for corporate investments, it also brings in new technology, global management systems and corporate governance practices.

Barclays chairman & chief executive (Asia Pacific) Robert Morrice pointed out that the percentage of FDI to GDP increased after 2006, a phase when the economy recorded the fastest average growth rate.