Higher FDI in India an unrealistic expectation: CII

London, Apr 12 (PTI) In view of the global economic
downturn, expectation of high level of Foreign Direct
Investment (FDI) into India would be unrealistic, industry
body CII said in a report.

Similarly, Foreign Institutional Investor (FII)
investments would be minimal, perhaps, nil, the Confederation
of Indian Industries (CII) said in a study titled 'Global
Economic Crisis: India's Recovery'.

The Confederation said India must depend on domestic
resources to support investment in infrastructure,
agriculture, industry and services sectors.

"Net FII investment end-February this year was 51 billion
dollars at book value. India needs to plan on the basis of a
steady fall," the study pointed out.

It claimed that there will be limited impact on stimulus
packages because the problem is far deeper and widespread
globally, beyond India. Such packages will need to be done
with care and caution to avoid fiscal bankruptcy happening.

"Fiscal caution needs emphasis. India cannot take the
risk of returning to high levels of deficit and debt. And, it
need not. High deficit works against RBI's attempt to reduce
interest rates. Long term yield have refused to decline
despite the fall in inflation and interest rates," it stated.

Moreover, the chamber said the most important means to
recovery in India is through infrastructure investment and
development.

The Confederation is of the view that the crisis in the
US, the EU and Japan is likely to continue through 2009 and
most of 2010. India, therefore, has to plan accordingly.

Noting that banks in India are stable and secure unlike
the US, the CII said in case any private sector bank shows
signs of sickness or failure, "in the public interest, such
banks should be merged with a strong public sector bank as
public trust in banks is crucial to maintaining confidence
since public deposits are with banks".

It said the private sector has a key role to play in
recovery because Indian entrepreneurship is of global quality.

"Generally, tax-levels for industry are now at reasonable
levels and need not be reduced further. Protection levels
should also not be increased. The private sector performs best
when put under competitive pressure," it said.

However, the private sector needs to restrain its high
levels of salaries and emoluments through "voluntary" action,
if necessary, persuaded by the government, it pointed out.

Also, it needs to set aside larger resources for social
development programmes as education, health and sports and
restrain its dividend payments. The full disclosure will be
critical including estimates of losses, it stated.

It said though India is not in recession like in the
USA, UK and Japan, there are a number of measures needed to
be adopted as if the country is in recession-- reduce
operating costs; increase productivity, reduce capital
investments and introduce new products and services. PTI HSR
DEP