Indian export prospects are weak and the 12th Five Year Plan projects a current account deficit of 2.9 per cent of GDP. This must be financed mainly through FDI and FII flows, so that reliance on external debt is limited.
But is it easy to attract FDI and FII?
To attract foreign financing our fiscal deficit should be under control and the growth momentum should be regained.
Our fiscal deficit is too high and is attracting adverse comment from analysts. It must be brought down over the medium term to release domestic resources for productive deployment in the economy.