Govt to ease SWF investment norms to stem Re fall

The government is hopeful that a sharp fall in gold imports along with proposals including relaxation in investment

The government is hopeful that a sharp fall in gold imports along with proposals including relaxation in investment norms for sovereign wealth funds would help stem the rupee fall.

Estimates show that gold imports,which touched 162 tonne in May,may drop to about 40 tonne in June. This would have a significant impact in controlling the current account deficit, a senior government official said,adding that this in turn would help take off some pressure from the rupee.

Indias current account deficit is estimated at 5 per cent in 2012-13 and touched a seven month high of $20.1 billion in May this year. The steep decline in imports of the precious metal come on the back of measures taken by the RBI and finance ministry including a hike in the import duty to 8 per cent,as well as price volatility in the metal.

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Meanwhile,the finance ministry is also finalising plans to ease investment norms for sovereign wealth funds and pension funds that would allow money from the Middle East to flow in more freely.

Discussions are on with the market regulator Sebi and Reserve Bank of India on how to improve flow of funds from these countries, a person close to the development said,pointing that funds from these countries would not only help finance long-term infrastructure projects but would also help develop the bond market.

The move comes after finance minister P Chidambaram,in May,met investors and CEOs of pension funds in Doha.

The domestic currency touched a life time low of 59.98 against the US dollar on Thursday,prompting the finance ministry to announce that it would take measures to curb volatility.

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Earlier this month,Sebi hiked the investment limit by $5 billion for foreign institutional investors in bonds issued by infrastructure companies.

Bhavish Aggarwal (Photo via his Twitter page)

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