Inside PM Modi’s economy review meeting - Masala Bonds, CAD and measures to boost rupee

Prime Minister Narendra Modi on Friday held a key meeting with Finance Minister Arun Jaitley, RBI governor Urjit Patel, his deputies and other top officials of Prime Minister’s Office (PMO) to take stoke of the economy amid the depreciating rupee and rising fuel prices. During the meeting, the focus was on finding ways to boost the depreciating rupee by controlling the expanding Current Account Deficit (CAD). The government vowed to take all the necessary steps to cut down non-essential imports and increase exports to overcome the rupee crisis.

Speaking to reporters on Friday, Jaitley gave an insider’s view of the meeting and made us aware of the significant decisions taken today.

The world economy and factors that affect India’s growth: “PM held a meeting today in which RBI's governor & deputy governor, officials of finance ministry & PMO officials were present. In the meeting RBI Guv gave a detailed presentation about the condition of world's economy & external factors which can affect the Indian economy,” Jaitley said after the meeting.

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On expending Current Account Deficit (CAD): During the meeting, a significant decision was made to address the issue of expanding Current Account Deficit CAD. Briefing reporters after the meeting, Jaitley said that the government will take several measures to cut down non-essential imports and also increase exports.

“The CAD (Current Account Deficit) measures would definitely have a meaningful impact. It is difficult to give a specific number. I think it should have an impact of USD 8-10 billion,” said Subhash Chandra Garg, Secretary DEA.

India's CAD widened to one year high at 2.4 per cent of the gross domestic product (GDP) in the April-June period from 1.9 per cent in the January-March quarter of 2017-18.

On Masala bonds: In the meeting with PM Modi, the Finance Ministry took decisions on Masala Bands- bonds issued outside India but denominate in Indian Rupees, rather than the local currency – The first decision was that in the financial year 2019 in relation to Masala bonds there will be exemption from withholding tax for issuance done in this year (March 31, 2019).

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Another decision that was taken during the meeting was that “there will be removal of restrictions on Indian Banks market making in Masala bonds including restriction on underwriting of Masala bonds”.

On Inflation: PM Modi and other top officials of the Finance Ministry, PMO and the RBI also discussed the rising inflation in the country. In a post-meet briefing, Jaitley said that the growth rate of the country was still positive and better than many other foreign countries.

“Our growth rate as compared to other countries of the world is quite high. Inflation in our country stays in a range & that range is moderate,” Jaitley said.