The Rupee continues its fall despite gaining some ground in the opening market on Friday.
On Friday, the Center has taken various steps to curb the Rupee fluctuations.
The meeting was headed by Prime Minister Narendra Modi who was briefed on the matter by the RBI Governor Urjit Patel, and top officials of the finance ministry on the health of the economy.
The steps include the removal of withholding tax on Masala bonds, relaxation for FPIs, and curbs on non-essential imports, to check Current Account Deficit or CAD, as well as increase inflow of foreign funds.
One of the important decisions is that mandatory hedging condition for infrastructure loans will be reviewed. This relates to external commercial borrowing (ECB).
It has also been decided to permit manufacturing entities to avail ECB facility with a minimum maturity of one year, instead of the earlier limit of three years, Jaitley said.
Further, restrictions will be removed with respect to FPI exposure limit of 20 per cent in the corporate bond portfolio to a single corporate group or company or entity and 50 per cent of any issue of corporate bond.
In April, the Reserve Bank had imposed these restrictions on FPIs.
With regards to rupee-denominated bonds, popularly known as Masala bonds, Jaitley said it has been decided to do away with the withholding tax on bonds issued till March 2019.
The current withholding tax is 5 per cent. It is to be noted here that no Masala bond has been issued so far in the current fiscal.
Jaitley also informed that restrictions on Indian banks on marketing and underwriting of masala bonds would be removed.
The finance minister further said that the government would restrict the import of non-essential items and encourage exports.
However, he did not disclose the list of non-essential items which would be subject to import restrictions.
“To address the issue of expanding CAD, the government will take necessary steps to cut down non-essential imports and increase exports. The commodities of which imports will be cut down will be decided after consultations with concerned ministries and will be WTO-compliant,” he said.
The restriction would also be imposed on private imports of such items, sources said adding that the items have been identified.
To a question on whether NRI bonds would be issued to stem the rupee fall, Mr Jaitley refused to comment.
Large trade deficit and rupee decline against the US dollar are putting pressure on the CAD, and these steps are likely to have a positive impact on the external sector.
Jaitley said the government gives importance to fiscal deficit and expressed hope it would be contained.
Economic Affairs Secretary SC Garg said the five measures would definitely have a meaningful impact. “It is difficult to give a specific number. I think it should have an impact of USD 8-10 billion,” he said.