New Delhi: India on Friday said it would ease foreign borrowing rules for firms in the infrastructure and real estate sectors, and raised the foreign investment limit in corporate bonds to $15 billion.
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As it unveiled a second stimulus package moments after the central bank slashed its main policy rates for a slowing economy, the government said it was preparing to recapitalise state-run banks to the tune of Rs200 billion ($4.1 billion).
This would take place over the next two years to ensure the banking system does not suffer from capital adequacy constraints.
It allowed the creation of a special financing entity to provide liquidity support against investment grade paper to non-banking finance companies.
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The statement said the liquidity potentially available though this window would be Rs250 billion.
India’s economy, Asia’s third-biggest, has shown consistent signs of slowing amid the worldwide downturn and high borrowing costs at home, after growing at 9% or above for the past three years.
Economists and government advisers and officials expect expansion to moderate to around 7% this fiscal year and the central bank’s chief said last month that 2009/10 looked like being an even more challenging year.
In early December, Indian authorities cut policy rates, announced $4 billion in extra spending and rolled out a four-percentage point cut in factory gate duties in an attempt to boost flagging activity.
Adding to concerns over stumbling economic growth, data on Thursday showed India’s exports contracting 9.9% in November from a year earlier, the second consecutive fall after a 12.1% dip in October.