After about three-hour-long meeting between Prime Minister Narendra Modi and the finance ministry, Finance Minister Arun Jaitley said that immediate steps will be taken to limit the current account deficit (CAD). India’s CAD is under intense pressure due to the falling rupee and rising crude oil prices and in the first quarter of the FY19 widened to 2.4% of the GDP.
Reserve Bank of India (RBI) governor was also present at the meeting who apprised the prime minister the macroeconomic situation of the country. The economic review meeting will continue tomorrow as well. Arun Jaitley said that the government is confident of meeting the fiscal deficit target of 3.3% but CAD needs immediate action.
- The government will take steps to reduce non-essential imports
- The government will remove curbs on Indian banks issuing Masala bonds
- Manufacturing entities will be allowed to access ECB of up to $50 million for maturity of one year
- The government will review mandatory hedging conditions for infra loans with respect to External Commercial Borrowings
- The government will review the removal of exposure limit of 20% of Foreign Portfolio Investors’ corp bond portfolio to a single corp group and 50% of any issue of corp bonds.
The meeting comes against the backdrop of the Indian currency falling around 6% since August to touch an all-time low of 72 level this week. Petrol and diesel prices have also touched record highs. Amid the rising demand of excise duty cut on fuel, the government, once again, has signaled at sticking to the fiscal deficit target.