The Centre may allow Indians to invest in listed foreign companies that have made big investments in India.

At present, individuals, mutual funds and companies can invest only in listed foreign companies that have at least 10 per cent stake in any listed Indian firm.

According to government officials, there is a case for creating a demand outflow for dollars given that the $70 billion foreign exchange reserves today cover 14 months of imports.

One way was to increase the number of foreign companies Indians could investment in from the 400-odd at present, they said.

"The idea is to expand the scope for overseas investments by Indian companies and individuals," an official said.

This could be achieved by allowing Indians to buy shares of foreign companies that had made pre-specified investments in India, he said, adding the Centre would also consider doubling the overseas investment limit for mutual funds to $2 billion, as suggested by the Tarapore Committee on capital account convertibility.

Officials said Finance Minister Jaswant Singh's January 10 announcement was restrictive. The government's intention was 'to feel the stones while it crossed the river,' said an official.

Although the relaxation on capital account transactions had been allowed for six months, after that the movement would be forward, the official added.

The foreign exchange reserves are hurting the economy now. The rupee is appreciating, making Indian exports uncompetitive.

"The government is waiting for a dollar outflow bump as the Resurgent India Bonds and India Millennium Deposits come up for redemption in September-October," said a finance ministry official.