India needs more sustainable, long term investment into the country.

The Reserve Bank of India (RBI) provided some relief to India in January by cutting policy rates by 0.25%. But, is there scope for further rate cuts? Well, not unless the government repairs its finances. India's current account deficit (CAD) is likely to reach a record high in FY13. As of September, 2012 it was at a record 5.4% of GDP. And last year it was at 4.2%. This gap desperately needs to be filled for the RBI to reduce interest rates further. According to RBI governor, D Subbarao, the country needed more foreign investment in assets such as plants and equipment. Currently most overseas investments are in equity and debt markets, from which investors can quickly exit. Instead of volatile fund flows, India needs more sustainable, long term investment into the country.