MeraNews Network, New Delhi: The government has announced an array of steps to check the rising Current Account Deficit (CAD) and the fall in rupee. The steps include removal of withholding tax on rupee-denominated bonds known as Masala bonds issued till March next year, relaxation for Foreign Portfolio Investment (FPI), and curbs on non-essential imports.
The decisions were taken at a meeting chaired by Prime Minister Narendra Modi in New Delhi yesterday to review the state of the economy. During the meeting, PM Modi was briefed by RBI Governor Urjit Patel and officials of the Finance Ministry.
Finance Minister Arun Jaitley told reporters after the meeting that several issues were discussed during the meeting and decision on them are likely in the next few days. He said, the government has decided on a number of steps to contain CAD, which widened to 2.4 percent of the GDP in the first quarter of 2018-19.
One of the important decisions is that mandatory hedging condition for infrastructure loans will be reviewed. This relates to External Commercial Borrowing (ECB). Jaitley said it has been decided to permit manufacturing sector entities to avail ECB up to 50 million dollars with a minimum maturity of one year, instead of the earlier limit of three years.
Further, restrictions will be removed with respect to FPI exposure limit of 20 percent in the corporate bond portfolio to a single corporate group or company or entity and 50 percent of any issue of corporate bond.
The Finance Minister said the commodities of which imports will be cut down will be decided after consultations with concerned ministries. He said external factors like policies adopted by the US, trade war and crude oil prices are impacting economies like India, despite strong fundamentals. Jaitley said India's growth rate as compared to other countries of the world is quite high.
The Finance Minister added that more issues would be discussed in a meeting with the Prime Minister today. Economic Affairs Secretary SC Garg said the measures would definitely have a meaningful impact.