Finance minister Arun Jaitley said five decisions have been taken to address the issue of high current account deficit which touched 2.4% of the GDP in the June quarter. Photo: PTI
New Delhi: After holding a marathon meeting with Prime Minister Narendra Modi on the state of the economy, finance minister Arun Jaitley on Friday announced a set of measures to boost market confidence, curb rising current account deficit (CAD) and stabilize the rupee.
Jaitley said five decisions have been taken to address the issue of high current account deficit which touched 2.4% of the GDP in the June quarter. Mandatory hedging conditions for infrastructure loans through external commercial borrowing (ECB) route will be reviewed and manufacturing entities will be allowed to access ECB up to $50 million for maturity of one year. Jaitley said now even Indian banks can issue overseas masala bonds. “Government will take efforts to reduce non-essential imports,” Jaitley said in view of rising trade deficit which stood at $17.4 billion in August.
Jaitley was accompanied by finance secretary Hasmukh Adhia, economic affairs secretary Subhash Chandra Garg and RBI governor Urjit Patel. Patel made a presentation to the prime minister in which he highlighted the strength of the Indian economy, Jaitley said.
Economic affairs secretary Subhash Chandra Garg told CNBC TV18 that the five measures announced will have an impact of around $8-10 billion.
The weaker rupee and rising fuel costs have become a politically sensitive issue with the main opposition Congress party having led a Bharat bandh on Monday. The rupee has depreciated more than 12% so far this year on a widening current account deficit and higher oil prices. The domestic currency was trading at 71.65 against the US dollar at noon on Friday, compared to its Wednesday closing of 72.19.
Finance minister Jaitley said earlier this month that there was no need for panic or knee-jerk reaction to the sharp rupee depreciation which he said was driven by global factors. The upheaval will eventually settle down and the inherent strength of the economy will play an important role, the minister added.
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