FinMin to brainstorm on measures to save rupee from further slide

NEW DELHI: In a strongest indication that the government could be looking at overseas bonds or other options to raise dollars, the finance ministry has called a meeting of global investment bankers and market participants on Friday to brainstorm measure to build defences against rupee’s slide.

India’s $284-billion foreign exchange reserves, which cover less than six months of imports, have been largely stagnant for the last few years as capital flows have been barely sufficient to cover the current account deficit that rose to 4.8% of GDP last fiscal. “The idea is to look at and discuss the options that are available,” said a government official.

The Indian currency has dropped from around Rs 54.5 to a dollar in the beginning of April to $59.67 on Thursday after breaching Rs 61 intra-day earlier this week on concerns that capital flows may not be adequate to cover the current account deficit.

The meeting called by chief economic advisor Raghuram Rajan on Friday comes after Chidambaram’s June last week’s discussions with investment bankers and economists on ways to create interest in Indian capital markets and attract overseas investments.

Rajan had held discussions about a rupee bond, a dollar bonds and a quasi sovereign issuance with market participants in the run up to the budget as well.

The finance ministry is eyeing market specific options that could be taken up to attract stable capital flows into the country, and the Friday’s meeting could help firm up some of the decisions already under consideration.

Options such as real estate investment trusts and tailormade investment options from infrastructure companies to sovereign wealth funds and also investment products for country specific investors are under discussion.

Some long-term investors such as pension funds and sovereign wealth funds have shown keenness to invest in the India story and the government is keen to capitalise on the sentiment.

One option is to allow public sector entities engaged in infra sector to raise funds from select markets where there would be interest and appetite for Indian paper.

India has already tried a hand at dollar-denominated quasi sovereign issuance State Bank of India’s Resurgent India Bonds and Millennium Deposits.

The finance ministry has in recent months deliberated such an overseas bond offer, directly or through state-run companies, but has not gone ahead for the fear that it may send a signal that it was worried about the situation.

Arvind Mayaram, secretary department of economic affairs, had told ET last month that different kind of bonds — NRI bonds, off shore rupee bonds, onshore dollar bonds — were all under consideration but the timing had to be right.