THE CONGRESS on Sunday termed as “half-hearted” and “half-baked” the measures announced by the government to contain the widening current account deficit and check the fall of the rupee and argued that it reflected the bankruptcy of economic vision of the Narendra Modi government.
Picking holes in the various steps announced by the government on Friday, Congress communication department head Randeep Surjewala said the measures were superfluous, parochial and would not have the desired impact, except for taking the country to pre-liberalisation era. “Their impact would be adverse on economy,” he said.
Surjewala said the government’s move to review mandatory external commercial borrowing (ECB) hedging conditions for infrastructure loans, for instance, will not yield the desired results. “In an environment of continuous depreciation of rupee against US dollar, it is doubtful if any borrower will be interested in an unhedged product,” he said.
He said the decision to permit manufacturing companies to avail of ECBs up to 50 million dollars with a minimum maturity period of one year could lead to further depreciation of the rupee.
“Due to continuous increase in NPAs for the last over 4 years under Modi government, banks are refusing to finance manufacturing and infrastructure companies. Hence, Indian companies have to look for external commercial borrowing option. As Indian companies buy more dollars, will it not lead to further depreciation of the rupee against US dollar and further increase in CAD (current account deficit)?” he asked.
On the decision to remove 20 per cent exposure limit of Foreign Portfolio Investors’ corporate bond portfolio to a single corporate group and review 50 per cent of any issue of corporate bonds, he asked “will allowing Foreign Portfolio Investors unlimited access to any NCD issuance or removing the investment cap not lead to infusion of hot money in certain sectors?”
He also suspected foul play in the decision to exempt masala bonds issued in 2018-19 from withholding tax. “Why has this option been restricted till March 2019? Is this an attempt to provide a limited window to certain foreign investors to bring hot money into Indian economy for speculative purposes?”