Finance Minister Arun Jaitley said the government, in an effort to keep the rising current account deficit in control, will focus on a five-point plan that ranges from boosting foreign portfolio investor participation in the corporate bond market to easing rules on external commercial borrowings.
Jaitley announced these five decisions:
- Mandatory hedging conditions for infrastructure loans will be reviewed.
- To permit manufacturing sector entities to avail external commercial borrowings up to $50 million with a minimum maturity of one year versus the earlier period of three years.
- Removal of exposure limits of 20 percent of FPI's corporate bond portfolio to a single corporate group, company and related entities, and 50 percent of any issue of corporate bonds will be reviewed.
- Exemption from withholding tax for issuance of Masala Bond issues done in FY19.
- And removal of restrictions on Indian banks' market making in Masala Bonds, including restrictions on underwriting of such bonds.
Jaitley said, in a press meet, that earlier in the day the RBI Governor had made a presentation on the global economy and on external factors that could impact Indian economy.
The broad conclusion of that presentation was that India’s growth rate is above that in other economies and inflation is within a moderate range.
As for external factors, the rise in the Dollar and in crude prices and the trade wars, are impacting India’s economy despite its soundness, Jaitley said.
One area that needs special attention is the rising current account deficit, he added before announcing the five measures. The government will take necessary steps to cut non-essential imports and increase exports, he added.
Jaitley also reiterated that the government will maintain fiscal deficit targets.
Several recommendations have come in from the RBI and Finance Ministry officials and more announcements will be made in the days to come, the finance minister said.
(This story was originally published on BloombergQuint and has been republished in an arrangement.)
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