Arun Jaitley outlines a series of reforms to check fall in rupee

New Delhi: To asses the prevailing issues of the Indian economy, an economic review meeting was conducted on Friday. The meeting was chaired by Prime Minister Narendra Modi to address the free fall in the Indian rupee this quarter.

After the meeting, India’s finance minister Arun Jaitley said that the government plans to take measures to cut down “non-necessary” imports, ease overseas borrowing norms for the manufacturing sector and relax rules around banks raising masala bonds, or rupee-denominated overseas.

These moves follow sharp declines in the rupee which is the worst-performing Asian currency this year. Despite strong GDP growth, the rupee has weakened about 11 per cent this year amid higher oil prices and an emerging markets sell-off. The falling rupee has widened India’s current account deficit and pushed its balance of payments into the red in April-June for the first time in six quarters and stoked inflationary pressure in the economy.

Jaitley said manufacturing entities will be permitted to make use of external commercial borrowings (ECBs) of up to $50 million with a minimum maturity of one year, down from three years earlier. ”It has also been decided to permit manufacturing entities to avail ECB facility with minimum maturity of one year, instead of the earlier limit of three years”, Jaitley said.

Further, restrictions will be removed with respect to Foreign Portfolio Investment (FPI) exposure limit of 20 per cent in corporate bond portfolio to a single corporate group or company or entity and 50 per cent of any issue of corporate bond. In April, the Reserve Bank had imposed these restrictions on FPIs.

The Finance Minister further said that the government would restrict import of non-essential items and encourage exports. However, he did not disclose the list of non-essential items which would be subject to import restrictions.

“To address the issue of expanding Cash against documents (CAD), the government will take necessary steps to cut down non-essential imports and increase exports. The commodities of which imports will be cut down will be decided after consultations with concerned ministries and will be WTO-compliant,” he said.

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