With Finance Minister P Chidambaram having set the ball rolling on steps needed to arrest the rapidly sliding rupee, top North Block officials on Saturday held hectic parleys among themselves to chalk out strategies towards achieving the seemingly stiff goal, even as there are indications coming that Government may on August 12 announce measures like relaxation in external commercial borrowings (ECB) norms for public sector entities, curbs on import of non-essential goods, and boosting exports.
Saturday's discussions were in line with Chidambaram's meeting with Commerce Secretary S R Rao on Friday, and according to sources, Economic Affairs Secretary Arvind Mayaram held meetings with several officials of the Finance Ministry including that of the Capital Markets division as well the Central Board of Direct Taxes (CBDT) and Central Board of Excise and Customs (CBEC). Some announcements are likely to be made by the ministry on Monday, either in Parliament or outside, sources said.
The steps being contemplated by the Ministry to check the rupee fall and boost forex flows include further relaxation of external commercial borrowing (ECB) norms for state-owned companies, curbs on import of non-essential goods and encouragement to exports. Mayaram, after a meeting of the Financial Stability and Development Council in Mumbai earlier this week, had hinted at some kind of an announcement on the rupee reforms front by August 12.
Chidambaram too had earlier said that the Government would be looking at “some compression in non-oil and non-gold imports, especially of non-essential goods.” He had cited the examples of coal and electronic hardware, adding that the officials would be working out a list of imported items that could be reduced. The Finance Minister had also said blue chip public sector undertakings could be asked to raise funds overseas. After the announcement, heads of several PSUs had met Finance Ministry officials, pleading for relaxation of ECB norms.
The new measures being considered by the ministry are in addition to steps taken recently by the Reserve Bank to tighten liquidity and curb volatility in the rupee, which touched a record intra-day low of 61.80 to the dollar on August 6. The RBI recently announced it would auction Rs 22,000 crore of bonds every Monday to suck out liquidity and check speculation in the forex market. The central bank had earlier raised the Marginal Standing Facility rate to make borrowing from the RBI expensive for banks. The RBI and the government have also taken steps to curb imports of gold. The current account deficit, which occurs when the total imports of goods, services and transfers exceed exports, had hit a record high of 4.8 per cent of GDP in fiscal 2012-13 as rising purchases of oil and gold from overseas widened the trade gap. A widening CAD also weighs heavily on the local currency.