An early passage of the Insurance Bill could help finance the current account deficit (CAD) , sending a very strong signal to the markets, said Raghuram Rajan, Chief Economic Advisor to Finance Ministry.
This is because insurance FDI will come in as soon as Bill is passed, according to Rajan. These remarks are significant as the Insurance Bill, which would raise the foreign direct investment (FDI) limit in the sector from 26 per cent to 49 per cent, is awaiting Parliament nod.
The monsoon session of Parliament is expected to commence in the first week of August.
Rajan expressed confidence that India will be able to manage the CAD problem if it were to continue looking for stable sources of financing — FDI, long-term equity investments, sovereign wealth funds and long-term pension funds.
There was a need to think about other sources of financing and remove impediments so that more FIIs (foreign institutional investors) are attracted, he added.
A couple of weeks back, the Centre expanded the limit for long-term investors such as pension funds and sovereign wealth funds in government securities.
“We have seen some inflows after that. We hope to see more as the rupee stabilises, and they come in expecting higher returns in India,” Rajan said at a recent event here.