New Delhi: The steps to be announced on Monday by the government and the RBI may include raising the interest for NRI deposits, cutting down wasteful expenditures and unveiling a bond issue for overseas investors to improve capital inflows in the wake of the rout in rupee.
Economic growth has fallen to a nine-year low of 6.5% in 2011-12 and industrial output continues to be sluggish with a mere 0.1% growth in April. Inflation too remained at an elevated level of 7.55% in May.
Hit by a weak global sentiment and subdued local macroeconomic performance, the rupee has lost over 25% in the last one year. It also breached the 57 level against the dollar on 22 June .
Market analysts expect RBI to announce an increase in interest rates for deposits of Non-Resident Indians. They also expect government to announce a bond issue to attract inflows.
“RBI may increase the interest rate on FCNR(B) deposit further and announce the issuance of bonds for Non-Resident Indians to address the issues in the short-term” Crisil Chief Economist D K Joshi said.
Experts also see steps being taken to reduce the twin deficits. CNI Research Head Kishor Ostwal said,“It might take steps to tame fiscal and current account deficits.”
Finance minister Pranab Mukherjee had on Saturday announced that the government and the RBI would take steps to arrest the declining rupee and improve market conditions.
“The steps we have taken...And we will be able to take certain measures to be announced on Monday which will improve market condition,” he had said.
