Centre slates steps to check rising Current Account Deficit and fall in rupee

New Delhi, September 15: With the backdrop of rising Current Account Deficit (CAD), and the fall in rupee, the Centre has slated an array of measures to check the financial outcomes. This decision came underway as Prime Minister Narendra Modi chaired a meeting to review the state of the economy.

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.

During the meeting, PM Modi was briefed by RBI Governor Urjit Patel and officials of the Finance Ministry. Briefing the media about the meeting, Finance Minister Arun Jaitley informed that several issues were discussed during the meeting and decision on them is 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% of the GDP in the first quarter of 2018-19.

One of the important decisions is that mandatory evading 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% in the corporate bond portfolio to a single corporate group or company or entity and 50% of any issue of corporate bond.

Jaitley further said India's growth rate as compared to other countries of the world is quite high. The measures would definitely have a meaningful impact.

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.