RBI booster fails to perk up markets,rupee

Planning Commission Deputy Chairman Montek Singh Ahluwalia tried to salvage rapidly ebbing investor morale: We will soon see a set of measures apart from what has been announced,particularly on implementation of large projects on which the Prime Minister has set up a new mechanism to move things faster.

RBI Governor D Subbarao had in an unusually candid presentation to investors last week,said the reasons for the rupees weakness were the dispute over the General Anti-Avoidance Rules GAAR that had spooked foreign investors,and the inability to move forward on reforms. These issues are in the finance ministrys domain.

The central bank today announced a 5-billion increase in the limit on foreign investment in government bonds,raising the cap to 20 billion,and a 10-billion increase in the external commercial borrowing limit for new projects. RBI also announced a few other minor steps,while the finance ministry said that the liberalised withholding tax provisions on overseas borrowings would be notified soon.

Mukherjee,who will resign tomorrow,had said on Saturday that some announcements would be made today. The ministry is hopeful that the measures will attract greater capital inflows,said Thomas Mathew,joint secretary capital markets in the finance ministry.