New Delhi: The government will “revisit” restrictions on foreign loans being raised by Indian firms for funding their activities within the country once capital inflows into India become moderate, finance minister P. Chidambaram said in an interaction with industry.
India had imposed curbs on the so-called external commercial borrowings (ECBs) last year in an effort to control capital inflows into the country that threatened to make the rupee stronger when compared to the currency of global trade, the dollar, and result in a spike in inflation.
Among other interventions, the curbs on ECBs mandated that companies could not bring in more than $20 million (Rs81 crore) raised through these instruments into the country for local expenditure.
Just hold it: Finance minister P. Chidambaram has asked businesses to refrain from raising prices and, where possible, to lower them. (Atul Yadav / PTI)
Chidambaram also asked businesses to refrain from raising prices and, where possible, to lower them so as to boost?consumption. After?three years of more than 9% growth, India’s economy’s is projected to expand at a slower rate this year, and growth in consumption could help it grow faster.
“There is a lesson for the manufacturing sector,” the finance minister said in a post-budget interaction with the industry lobbying body Federation of Indian Chambers of Commerce and Industry. “You have to become more competitive. Hold the price line and if possible lower prices.”
With the agriculture sector growing at a very slow rate and credit still very expensive, consumption is flagging. Manufacturers have been passing on their rising cost of doing business to consumers, which has led to higher prices for everything from foodgrain to timber. Worse, exports have been hit by the sharp appreciation of the rupee against the dollar. The rupee has appreciated 9.65% against the dollar since January 2007. The Indian unit is currently trading at Rs40.29.
Chidambaram urged companies in industries such as cement, pharma, automobiles and paper to lower prices. “Expand volume of production and gain in volume what you might lose in lowering prices,” he said.
The finance minister also asked all the state chief ministers to extend their support to the exports sector, which has been hit by the rising rupee. “Just as the Central government reimburses each tax imposed on the export industry, I appeal to all states to do the same to give relief to the exporters,” he added.
(PTI contributed to this report.)