Prelims level : Indian Economy Mains level : Paper – III Indian Economy & Issues relating to planning obligation resources
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  • In an effort to encourage capital flows against the backdrop of a widening current account deficit, the government announced that it will focus on a five-point plan which aimed at supporting the rupee, which has been under pressure in the last few


  • As India’s current account deficit widened to $15.8 billion about 2.4 per cent of the country s GDP in the first quarter of this fiscal as against $15 billion in the year-ago quarter.
  • The five-point plan that ranges from boosting foreign portfolio investor participation in the corporate bond market to easing rules on external commercial borrowings. The government is committed to maintain its fiscal deficit target even as it monitors the impact of external factors on the Indian
  • Mandatory hedging conditions for infrastructure loans will be reviewed. Presently there is no compulsion on borrowers to hedge these
  • To permit manufacturing sector entities to avail external commercial borrowings up to $50 million with a minimum maturity of one year versus the earlier period of three
  • Removal of exposure limits of 20 percent of foreign portfolio investors’ corporate bond portfolio to a single corporate group, company and related entities, and 50 percent of any issue of corporate bonds will be
  • Exemption from withholding tax for issuance of Masala Bond issues done in FY19.Removal of restrictions on Indian banks’ market making in Masala Bonds, including restrictions on underwriting of such bonds. Masala bonds are rupee-denominated instruments issued abroad by Indian borrowers. The advantage of these bonds is that any depreciation in the rupee will not affect the
  • One broad policy decision was to address the issue of expanding current account deficit. The government will take necessary steps to cut down non-essential imports and increase exports. The non-essential import items would be decided in consultation with various ministries and will be announced as and when the decisions are taken in the next few days.
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