By Kartik Goyal/Bloomberg
New Delhi: India’s decision to ban overseas borrowings by local real-estate firms is aimed at curtailing debt flows, finance minister P. Chidambaram said.
India last week banned real-estate companies from raising funds overseas to develop townships, its latest measure aimed at limiting foreign-exchange inflows that has spurred the currency to a nine-year high, hurting exports.
The measure is expected to help check capital inflows into the country and stem the gains in the currency, the fourth-best performer in the world this year after gaining 9% against the dollar. “The rise in rupee is worrying for exports and also for the manufacturing sector,” commerce minister Kamal Nath said.
The Reserve Bank of India (RBI) slowed dollar purchases after buying a record $11.8 billion (Rs48,380 crore) in February, on the concern that rupee funds injected from intervention will stoke inflation.
The inflation rate has stayed above the RBI target of about 5% since last September. It slowed to 5.44% in the week ended 5 May after hitting a high of 6.69% in January.
The currency rose 0.2% to 40.6763 against the dollar as of the 5pm close in Mumbai, according to Bloomberg data. That is the highest since 22 May 1998. It may advance to 40.55, according to the median estimate of 12 traders surveyed.