Union Finance Minister Arun Jaitley. (Source: PTI)

Finance Minister Arun Jaitley Announces 5 Measures To Control India’s Current Account Deficit

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Government's 5-Point Plan

  • Mandatory hedging conditions for infrastructure loans will be reviewed. This is in regard to external commercial borrowings.
  • To permit manufacture sector entities to avail external commercial borrowings up to $50 million with a minimum maturity of one year. Earlier this used to be three years.
  • Removal of exposure limit of 20 percent of FPI's corporate bond portfolio to a single corporate group, company and related entities and 50 percent of any issue of corporate bonds will be reviewed. This is in regard to FPI investment in debt.
  • In financial year 2018-19, with regard to masala bonds, there will be exemption from withholding tax for issuance done in this year, up to March 31, 2019.
  • There will be removal of restriction on Indian banks market making in masala bonds including underwriting of masala bonds.

A broad policy decision to address the issue of expanding current account deficit was that the government will take necessary steps to cut down non-essential imports and also increase exports, Jaitley said. Non-essential imports will be decided by consulting the respective ministries in the next few days.

RBI Governor Made Detailed Presentation

RBI governor, based on the global economy and external factors, has made a detailed presentation to the finance ministry, Jaitley said.

External Factors Impacting India

External factors like policy decisions in the U.S. which have resulted in the outflow of dollars, global crude oil prices and a looming trade war have had an impact on India despite our strong fundamentals, Jaitley said.