The Indian government has announced a bunch of measures to curb depreciation of rupee which recorded a historic fall this year, and kept the door open to announce more steps to protect the health of the domestic economy.
Indian finance minister Arun Jaitely after an economic review meeting chaired by prime minister Narendra Modi on late Friday (14) said that his government aims to takes necessary steps to reduce unnecessary imports, ease foreign borrowing rules for production sector and relax norms around banks raising rupee denominated overseas bonds.
Despite strong gross domestic product (GDP) data, the rupee continued to be the worst-performing currency in Asia this year. The rupee has recorded a fall of 11 per cent so far this year amid higher crude oil import bills and steep uptick in domestic currency sell-off.
These issues have widened India’s current account deficit and pulled its balance of payments into the red zone in April-June period for the first time in 18 months. The outflow of the dollar, global trade tensions, and high crude oil import bills have adversely impacted India and its currency despite strong fundamentals, the minister said.
The finance minister said according to the initiates taken to curb depreciation of rupee, manufacturing entities will be allowed to make use of external commercial borrowings (ECBs) of up to £38.26 million with a minimum maturity of 12 months, down from previous maturity period of three years.
Meanwhile, the market analysts opine that the proposed measures wouldn’t help Indian currency to get higher strength against the dollar and other rival currencies. However, these small initiatives are very likely to limit steep fall in the currency.
The markets had been expecting India would declare steps like Non-Resident India (NRI) bonds to boost its currency.
The Indian government in 1998, 2000 and 2013 tapped NRIs to invest in NRI bonds to support to raise its foreign exchange reserves and curb further fall in the currency. However, Jaitely declined to comment on such measures and said “this is a market-sensitive information.” The minister further noted that there would be more than one meetings and more measures would be announced separately.