Purwar said that currently the rate difference between the US Fed rate and reverse repo rate in India was 75 basis points but this was likely to be come down once the Fed rate was revised upwards.
"There has been indication that US Fed rate might be hiked by 50 bps in 2 doses. Consequently, difference between Indian reverse repo and US Fed rate would be reduced to 25 bps," he noted.
Such a meagre difference in interest rates between the two markets might not be able to attract foreign investors to India, he hinted. Meanwhile, other factors including oil price and deficit might be cause for worry.
But despite all these factors, the good news was that the busy season being over, the liquidity in the market was okay, Purwar assured.
He was speaking at an interactive session on 'Indian Economy- Blueprint for future growth' organised by the Bharat Chamber of Commerce in Kolkata.
Purwar assured that the undertone of the economy was very strong. "Even small-sized corporates have joined the league in terms of overseas acquisition. During the first nine months of 2005, corporates made acquisitions worth $1billion," he added.
"SBI is trying to follow Indian corporate as they are going abroad. SBI is concentrating on places where the Indian diaspora is strong so as have more remittance business," he added.
Pharmaceutical, automotive industry, food were among prospective industry segments where overseas acquisition could blossom, he noted.
"Interest rate is cyclical in nature. Industry should be able to use innovative products to raise funds so as to reduce their interest costs," Purwar added.
