Measures to control CAD will churn benefit of USD 8-10 billion: DEA secretary

Economic affairs secretary Subhash Chandra Garg on Friday expressed hope that the new measures taken to tackle higher Current Account Deficit (CAD) would have an impact of nearly USD 8-10 billion.

Garg said that" the five CAD (Current Account Deficit) measures would definitely have a meaningful impact. It is difficult to give a specific number. I think it should have an impact of USD 8-10 billion."

He further added, "in a meeting chaired by Prime Minister Narendra Modi discussion was mainly focused on current account and what can be done in capital account to finance the current account. The Economic affairs secretary said that there will be constant review on the current account side, probably by next week."

Earlier on Friday, Finance Minister Arun Jaitley said that a broad policy decision has been taken to address the issue of expanding CAD under which the government will take necessary steps to cut down non-essential imports and also increase exports.

Maintaining the fiscal deficit is government's main priority and they are confident of maintaining it, the Finance Minister averred.

In a meeting chaired by Prime Minister Narendra Modi, five key decisions were taken by the government concerning External Commercial Borrowings (ECBs), Masala bonds, Foreign Portfolio Investment (FPI) among others.

Jaitley informed that as the first measure, in reference to External Commercial Borrowings (ECBs), the mandatory hedging condition for infrastructure loans will be reviewed.

In the second measure the government has decided to permit manufacturing sector entities to avail external commercial borrowing up to 50 million with a minimum maturity of one year. Previously, this maturity was of three years.

In a third measure to tackle higher current account deficit, a decision has been taken to review removal of exposure limit of 20 percent of FPI's corporate bond portfolio to a single corporate group i.e company and related entities and 50 percent of any issue of corporate bonds.

Two other significant measures were taken in reference to masala bonds, detailing about which, Jaitley said, "It has been decided that this financial year 2018-19, there will be an exemption from withholding tax for issuance done in this year (up to 31 March 2019). Also, there will be a removal of the restriction on Indian banks, market making in masala bonds, including a restriction on underwriting of masala bonds.