FinMin working on additional steps to contain rupee fall

NEW DELHI: Worried over the widening current account deficit (CAD) and the sliding rupee, Finance Minister P Chidambaram today held a series of meetings with top officials to firm up additional steps to support the currency.
The measures could include further relaxation of external commercial borrowing (ECB) norms for state-owned companies, curbs on import of non-essential goods and encouragement to exports, sources said.

Chidambaram also held deliberations with Commerce Secretary S R Rao.

The Ministry, according to sources, is likely to announce additional steps soon to contain CAD and check volatility in the forex market.

Chidambaram had earlier said the government would be looking at "some compression in non-oil and non-gold imports, especially of non-essential goods." He had specifically cited the examples of coal and electronic hardware and said that the officials would be working out a list of imported items that could be compressed.

The Minister had also said that blue chip public sector undertakings could be encouraged to raise funds from overseas markets. Pursuant to the announcement, heads of several PSUs met Finance Ministry officials, pleading for relaxation of the ECB norms.

The new measures being considered by the Finance Ministry are in addition to steps taken recently by the Reserve Bank to tighten liquidity and curb volatility in the rupee, which touched a life-time intra-day low of 61.80 to the dollar on August 6.

The RBI yesterday announced it would auction Rs 22,000 crore of bonds every Monday to suck out liquidity and check speculation in the forex market.

Earlier, the central bank had raised the Marginal Standing Facility rate to make borrowing from the RBI expensive for banks. The RBI and the government have also taken steps to curtail imports of gold.

The current account deficit, which occurs when the total imports of goods, services and transfers exceed exports, had hit a record high of 4.8 per cent of GDP in fiscal 2012-13 as rising purchases of oil and gold from overseas widened the trade gap.

A widening CAD also weighs heavily on the local currency.