New Delhi:The government has decided to cut non-essential imports and increase exports amid a widening current account deficit (CAD), sliding rupee and soaring crude oil prices, Finance Minister Arun Jaitley said on Friday. The government, in a meeting chaired by Prime Minister Narendra Modi, also decided to remove restrictions on external commercial borrowings, masala bonds to control the current account deficit, which slipped for the first time in six quarters in April-June. Masala bonds are rupee-denominated instruments through which Indian entities can raise funds by accessing overseas capital markets.

Economic Affairs secretary Subhash Chandra Garg said, while it is difficult to give a specific number, it should have an impact of $8-10 billion. Jaitley said that to address the issue of expanding CAD, the government will take steps to cut down non-essential imports and increase exports. ‘In relation to Masala bonds there will be exemption from withholding tax for issuance done in this year (March 31, 2019),’ he said.

He said that there will be removal of restrictions on Indian Banks market making in masala bonds, including restriction on underwriting of Masala bonds. It was decided to permit manufacturing sector entities, avail external commercial borrowing upto $ 50 million with minimum maturity of one year, against the earlier norm of three years. Also mandatory hedging condition for infra bonds will be reviewed.

It was decided to remove exposure limit of 20 per cent of Foreign portfolio investment (FPI) corporate bonds portfolio to a single corporate group and 50 per cent of any issuance. Mr Jaitley said that a series of more measures will be announced in coming days to help in current account deficit. He said that during a presentation given by RBI it was said that India’s growth is fast compared to other economies and inflation was also in moderate rage. He said that government is confident to achieve the fiscal deficit target for the current fiscal year. However, the finance minister admitted that despite strong fundaments CAD has been impacted due to external factors. ” Prime Minister will also be brain storming over economic issues and “state of the economy” with economists and senior government officials on Saturday.

The meeting on Saturday assumes significance due to free fall in the value of the Rupee and increase in fuel prices which are life time high. However, till now finance ministry has resisted pressure to cut taxes on fuel. The government is under pressure from the opposition parties over high fuel prices. The main opposition Congress party had on Monday held a Bharat bandh.

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