Chidambaram hints at overseas bonds by PSUs, import curbs

Says, RBI policy hints at interest rate easing once rupee stabilises

Finance Minister P Chidambaram on Wednesday said public-sector undertakings (PSUs) and state-run banks could be asked to raise money abroad and some non-essential imports might be curbed, along with an easing in foreign investment norms, to rein in and finance the country’s current account deficit (CAD).

“We are looking at some compression in non-oil and non-gold imports to curb demand for non-essential luxury items… There’s no rocket science in manufacturing basic electronic hardware... So, we can manufacture electronic hardware goods here,” he said at a press conference on completion of one year in office.

Asked about the possibility of a sovereign bond issue, Chidambaram said it was an option on the table but the government would not rush into a decision. He acknowledged the Reserve Bank’s apprehensions on sovereign bonds “deserves weight”, but quasi-sovereign bond issues were doable, and PSUs, most of which had strong balance sheets, might be asked to take that route.

The finance minister said the government was looking at further liberalising the foreign direct investment (FDI) policy, relaxing external commercial borrowing (ECB) norms, and attracting investments from sovereign wealth and pension funds, as well as non-resident Indians (NRIs). Also, the government would soon bring in more clarity on FDI in multi-brand retail, as the commerce ministry was in the last leg of clarifying the policy, he said.

He added the government would be able to contain fiscal deficit, as well as CAD, without drawing on foreign exchange reserves. Even without additional measures, the inflows would be well above $80 billion and this would be sufficient to finance CAD, which would be contained at a level below last year’s.

The government hopes to contain gold imports at a level well below last year’s 845 tonnes. In June 2013, the imports of the yellow metal were down to 31 tonnes; up to July 25, it was 45 tonnes.

On RBI and independent economists lowering their growth projections for the country, he said the economy would record a growth rate of 5.5-6 per cent in the current financial year — higher that last year’s five per cent. He added ample funds were available with banks and credit needs of the industry would be fully met.

On transfer pricing, the finance minister said safe harbour rules would be announced by August 7 to address the concerns of multinational firms on transfer-pricing issues.

Asked about an extension for RBI Governor D Subbarao, whose present five-year term ends on September 5, he said the latter wanted to move on and that search for a new governor was on.

Replying to questions on the rupee, the minister said, though he did not have a fixed target in mind, he would endeavour to check volatility and end speculative trades on the domestic currency.

FMSPEAK
On Insurance Bill: I hope the Opposition leaders will give a final view on hike in FDI cap to 49%
On RBI governor: He (Subbarao) said he should not be considered for another term. I accepted that. We’re in a search-cum-selection mode
On growth: We are looking at a 5.5-6% growth rate. We’ll take all measures to achieve that
On import curbs: We’re looking at compression in non-oil & non-gold imports. Electronic hardware can be manufactured in Rajasthan and Kerala
On former CAG Vinod Rai: I don’t think policy can be questioned by CAG. Govt makes policies. If those are wrong, Parliament and people will pull it up