Central bank issues draft framework on easing ECB rules, seeks public response on it by Oct 11
India is looking to make it easier for companies to borrow overseas and is also set to start work on simplifying rules for foreigners to invest in the country, a top finance ministry official said, outlining key reforms in the works that needn't necessarily wait for next year's budget.
Economic affairs secretary Shaktikanta Das also pledged more structural policy changes, while ruling out any plans for a stimulus package, which he said would create more problems than it would solve. He said the government wanted to roll out the goods and services tax (GST) at the earliest and added that India has enough buffer stocks to cope with any shortfall in the harvest due to a rain-deficient monsoon. The Reserve Bank of India (RBI) issued a draft framework on liberalising external commercial borrowing (ECB) norms on Wednesday . The proposals are based on discussions between the finance ministry and RBI, Das said at an Assocham conference on Wednesday . The RBI has sought responses from the public to the norms by October 11.
The government is also planning to do away with various restrictions to make the foreign direct investment (FDI) policy more pro gressive and increase India's attractiveness as an investment destination. ET had first reported on September 7 that the government was working on easing the FDI policy. The government will try and push reforms through without waiting for the 2016-17 budget, due in February next year.
“In terms of priority and direction of government policy in coming months and weeks, as we go to the budget... it's not the case that the government will wait for the budget,“ he said. “Policy initiatives (are) round the clock, a 24x7 exercise and it will continue. The government will initiate a series of reform measures from time to time.“
The Narendra Modi government has been frustrated in its attempts to introduce policy changes and free up the economy further by op position resistance. ECB norms will be relaxed keeping in view the overall external position and monetary stability, Das said. Such borrowings have implications for financial stability as they add to the country's overall external debt and future repayment liabilities.
“It will be our effort to liberalise ECB without causing any harm to essential inherent financial and monetary stability of India,“ he said. “We will, to the extent possible, liberalise various norms so that funds are available to corporates and other investors in India.“
Of India's external debt, ECBs constituted the largest chunk at 38.2% at the end of March, up from 27.8% at the end of March 2009.Outstanding ECBs total $148 billion. With regard to FDI, the government has opened up new sec tors and lifted sectoral caps, he said. “But there is a lot more to do,“ he added, without elaborating.
The government has eased overseas investment norms in areas such as defence, insurance, construction, medical devices and railways. He said the government is looking for ways to resolve issues facing electricity distribution companies. On the state of economy, Das said investment activity was showing signs of revival, although fluctuating monsoon rains were a concern. Das ruled out any fiscal boost for the economy apart from what has been budgeted. “How do you ensure demand revival? Obviously, we cannot resort to fiscal expansionary measures which were initiated five-six years ago when the financial crisis hit the world market,“ he said.
The Economic Times, New Delhi, 24th Sept. 2015
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