Now, services sector receives ECB boost

In a bid to ensure that the Services sector, which accounts for 55 per cent of India’s GDP, is not starved of funds for growth, the government today eased the policy on external commercial borrowing (ECB) from markets abroad at relatively lower interest rates, for the sector. “It has been decided that, henceforth, borrowers in the Services sector (hotels, hospitals and software companies) may avail of ECB up to $100 million for import of capital goods under the approval route,” the government said in a statement. Currently, borrowers in the services sector are not eligible to avail of ECB under the automatic route.

The ECB policy is regularly reviewed by the government in consultation with the RBI to keep it in tune with the evolving macroeconomic situation, changing market conditions, sectoral requirements, the external sector and lessons of experience, the statement added.

Commenting on the development, Aditya Birla Group chief economist Ajit Ranade said, “This is a small step. It looks like it is meant only for the Services sector’s foreign payments regarding import of capital goods. I expect that as inflation concerns recede, the ECB policy will gradually be liberalised.” He noted that further relaxation of the ECB policy would enable domestic borrowers to access rupee or dollar funds, whichever is cheaper, assuming that their loan is approved.

FE