10% fall in rupee temporary phenomenon: Garg
New Delhi : The government will soon announce import curbs on several non-essential items, Economic Affairs Secretary Subhash Chandra Garg said on Wednesday while terming “the 10 per cent depreciation” in the rupee in the last few weeks as a “temporary phenomenon”.
“There are always implications of the dollar and rupee exchange rates … this 10 per cent depreciation in last few weeks that is a temporary phenomenon,” he said at an event organised by PHD Chamber of Commerce here.
To a question about when the government intends to impose import curb on non-essential goods, he replied, “very soon.”
He, however, did not give any timeframe.
Last week, Finance Minister Arun Jaitley announced the government’s decision to relax norms for raising overseas borrowing and impose restrictions on the non-essential imports as part of efforts to check rising current account deficit (CAD) and a falling rupee.
India’s current account deficit deteriorated to 1.9 per cent of GDP in 2017-18 from 0.6 per cent in the previous year and is forecast to rise to around 2.8 per cent in the current year. The trade deficit expanded to $80.4 billion in the first five months of the current fiscal year from $67.3 billion in the year-earlier period.
The rupee has logged year-to-date losses of more than 13 per cent against the strengthening US dollar after trade concerns and firming up crude oil prices. It has dropped close to 6 per cent since August. Garg exuded confidence that the fiscal deficit would be maintained as per the Budget announcement despite pressures.
“Come what may, oil situation, rupee or whatever the fiscal deficit will not be allowed to slip from 3.3 per cent, or better as we go along. I think all the pain points, all the issues which were earlier thought of as something unknown, whether it’s the MSP (minimum support price), all these have now been factored into,” he said.
On the price rise, Garg said, 4 per cent inflation for a developing economy is healthy, it is not something unhealthy or detrimental for the economy.
The Economic Affairs Secretary also explained that since the dependence of 50 per cent of India’s populace is on agriculture, it needs a transition and therefore, required policy steps.
The government has announced various schemes including Ujjwala Yojana, health protection and rural electrification with the intention to bring change in rural India, he said.
Besides, he said, the government has drawn up a programme for increasing the export of agri products from $30 billion to $100 billion. “India’s agri exports potential is as high as $100 billion against a current export of $30 billion.
RBI eases ECB norms to prop up rupee
Mumbai: The Reserve Bank of India (RBI) on Wednesday eased norms for companies in manufacturing sector to raise overseas funds and allowed Indian banks to market Masala Bonds in line with the government’s measures to prop up the rupee. Following a review of the economy by Prime Minister Narendra Modi last week, the government announced an array of measures to check the decline of rupee and curb the widening current account deficit (CAD). Liberalisation of the External Commercial Borrowing (ECB) norms was among other measures announced by the government. “It has been decided, in consultation with the government, to liberalise some aspects of the ECB policy including policy on rupee denominated bonds (Masala Bonds) …,” the RBI said. As per the revised policy, eligible ECB borrowers who are into manufacturing sector, will be allowed to raise ECB up to $50 million or its equivalent with minimum average maturity period of 1 year. The earlier average minimum maturity period was three years. The central bank has also made changes in norms wherein Indian banks can market Masala Bonds overseas.
At present, Indian banks can act only as arranger/ underwriter for such bonds and in case of underwriting an issue, their holding cannot be more than 5 per cent of the issue size after 6 months of issue.
Now, the banks can “participate as arrangers/ underwriters/ market makers/ traders in RDBs issued overseas subject to applicable prudential norms,” the notification said.
The rupee has been losing value against the US dollar, and had almost touched 73 on Tuesday.
However, the domestic unit Wednesday bounced back by 61 paise to end at 72.37 against the dollar.