Faced with declining rupee and rising current account deficit,the Government of India may come out with NRI bonds to attract overseas funds.
“We will be looking at all options for safe financing of CAD…. It is still early days,” Chief Economic Advisor Raghuram Rajan said when asked if the government is considering floating NRI bonds.
In order to overcome external sector problems,the government had earlier raised funds through India Development Bond (IDB) of 1991,Resurgent India Bonds (RIB) in 1998 and India Millennium Deposits (IMD) in 2001.
While the IDB fetched USD 1.6 billion,USD 5 billion each was raised through the RIB and IMD.
Rajan said people have suggested various ways of raising foreign exchange to deal with the external sector problems.
The NRI Bonds assumes significance in view of the falling value of rupee,which today touched an all time low of 58.50 to a dollar.
Among other things,Rajan attributed the rupee fall to widening CAD and trade deficit,mainly because of surge in gold imports.
The rupee has fallen nearly 10 per cent in past six weeks and over 2.5 per cent in past two trading sessions.
The monthly average gold import in the current fiscal was 152 tonnes as against 70 tonnes in 2012-13. The foreign currency outgo on gold import is estimated at USD 15 billion in the first two months of 2013-14.
India’s CAD,which touched a record high of 6.7 per cent of GDP in December 2012 quarter,is likely to be around 5 per cent during the last fiscal.
RBI has been saying that India cannot sustain a high CAD and ideally it should be around 2.5 per cent of the GDP.
Gold prices today rose by Rs 227 to Rs 28,418 per 10 gm in futures trade,largely on speculative positions created by participants amid a firming trend at the spot market.