Economy

Govt to ease ECB norms, come down on non-essential imports

Our Bureau New Delhi | Updated on November 25, 2019 Published on August 12, 2013


The Government announced fresh measures on Monday to shore up the rupee, by placing more curbs on ‘non-essential’ imports like gold, while trying to boost the inflow of foreign exchange by easing external borrowing for corporates and allowing certain government-owned institutions to raise ‘quasi’ sovereign debt.

The Government is set to hike import duty on gold and silver, as gold and silver demand continued to rise unabated. India's precious metal imports hit $2.9 billion in July, up from $2.45 billion in June. Silver imports account for a small fraction of this total. Although Finance Minister P. Chidambaram did not specify the increase in the rates, the import duty on gold may be raised by another two per cent, while on silver, this may be hiked by four per cent.

Currently, import duty on gold is eight per cent while it is six per cent on silver. The gold import bill accounts for almost 50 per cent of the current account deficit. Imports have risen despite the import duty on gold being raised thrice since January.

Chidambaram said that concerned notification on the import duty will be placed in Parliament as ‘earliest opportunity’, which could be even Tuesday. With compression of import measures, the Government expects gold import to come down to 850 tonnes from 950 tonnes in 2012-13. This is likely to save $4 billion.

The Finance Minister clarified that saving due to compression of silver has not been taken into consideration. The Ministry is also expected to raise import duty on certain other luxury items considered non-essential. The specific items will be announced in Parliament later.

Forex inflows

In an effort to boost inflow of foreign currency, Chidambaram said the Power Finance Corporation and India Infrastructure Finance Corporation Ltd will be allowed to issue bonds to the tune of $1.5-billion each, while the Indian Railway Finance Corporation will raise another $1 billion worth of ‘quasi’ sovereign bonds. These bonds will have an implicit sovereign guarantee. Funds mobilised will be used to finance long- term infrastructure.

As a part of liberalisation of ECB guidelines, although the overall limit of $40 billion has not been raised, subsidiaries of multinational companies have been allowed to raise money from their parents. It has also been decided to bring maintenance, repair and overhaul business as a part of airport infrastructure.

Under the ECB route, Indian Oil will raise $1.7 billion, while BPCL and HPCL will raise $1 billion each. The Government, in consultation with the RBI, has also liberalised norms for Non-Resident External (NRE) Rupee Account. Here banks will not face any additional CRR or SLR requirement for any additional flows under this head. At the same time, interest rates on Foreign Currency Non-Resident Account with maturity of three years and above have been deregulated.

> shishir.sinha@thehindu.co.in

Published on August 12, 2013
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