Govt may soon announce import curbs on several non-essential items

The government had earlier this month announced easing of overseas borrowing norms for manufacturing companies, removal of restrictions on foreign portfolio investors (FPI) investment in corporate bonds and tax benefits on Masala bonds to shore up rupee and check widening of current account deficit.

Now, the Centre has prepared a list of non-essential items whose imports can be curbed and also drawn up a separate list of goods whose exports can be boosted with a little policy intervention, Garg said.

On the rupee continuing to fall despite the first set of measures, he said “full components of the steps have not been implemented as yet, especially curb on the import of non-essential items and boasting some of the exports etc. Those are still to come.”

“These measures are at the final stage. Very soon, these should be announced,” he said.

A group headed by the Commerce Secretary has “more or less” completed its task on finalising the list, the DEA secretary said.

“Once it gets the nod from higher-ups, it will be announced…It will happen very early,” he said.

The rupee on last Friday closed at 72.20 to the US dollar, higher than the record low of 72.91 it had hit earlier this month.

The government, Garg said, is concerned about the rupee’s slump and its adverse impact on the Current Account Deficit (CAD).

The CAD, the difference between inflow and outflow of foreign exchange, widened to 2.4% of GDP in the first quarter.

The fall in rupee has shot up oil import bill for the world’s fastest-growing oil user by 76% to $10.2 billion in July.

Garg said the appropriate level for the rupee is 68-70 per dollar, with 72 being the reasonable outer limit for depreciation.

With the first round of measures not having any desired impact, he said there is no question of government being helpless as there are more measures to be taken to rein in falling rupee.

Garg further said that in view of present circumstances, CAD and present capital flows, 68-70 range appears to be a reasonable level.

“When it suddenly went down from 69 to 72, the government rightly got concerned that this kind of sudden depreciation is not justified,” he said.

Garg added that the Indian economy recorded an excellent growth of 8.2% in the first quarter, inflation is low, macroeconomic fundamentals are good, the government is strictly maintaining fiscal deficit and expenditure programme is going on well.