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Although the government measures announced on Monday to boost inflow of foreign funds, in a bid to arrest the fall of rupee against the dollar, failed to cheer up the market, the Finance Ministry said the steps will help large export companies to access money from abroad.
“We are looking at companies which have a large export potential to access money from abroad and have a large investor base,” Joint Secretary in the Finance Ministry, Thomas Mathew, told reporters.
The rupee had plunged to its all-time low of 57.37 against the US dollar last week, the biggest fall of 85 paise in a day this year, because of increased demand from oil importers.
RBI raised the FII investment limit in government bonds by $5 billion to $20 billion on Monday and allowed the Indian companies to avail external commercial borrowings up to $10 billion for repayment of rupee loans and fresh capital requirement.
The Deputy Chairman of the Planning Commission Montek Singh Ahluwalia also said that the measures will help boost the flow of resources. He also expressed hope that India will soon see a set of measures on implementation of large projects on which the Prime Minister has set up a new mechanism to move things faster.
Similarly, PMEAC chief C Rangarajan said that the measures will help enhancing capital flows and stem the fall of rupee in the long run. He said that the rupee fall has been largely because of a mismatch between the current account deficit and capital flows.
But rating agency CRISIL’s Chief Economist D K Joshi said, “I think the measures will have no immediate effect.” The move is aimed at boosting foreign inflows into the country. However, it will also depend on risk appetite of foreign investors and global economic environment.
KPMG India Parter Rohit Bammi also agreed that the RBI steps would have a limited impact on the spot rupee level.
“While increase in the government bond limit is certainly beneficial for the bond markets in the medium-term, the ECB announcements are unlikely to have any meaningful impact on the rupee level in the near-term,” Bammi said.