"In a situation like this, encouraging inflow would help ease inflation. Easing of ECB should happen logically. Sooner or later there will be a high-level co-ordination committee on ECB," finance ministry sources told PTI.
The sources said the upcoming HLC would have discussion on relaxing the norms further. The HLC on external commercial borrowing comprises finance ministry officials and representatives of SEBI and RBI.
When asked about the amount of ECB that could be allowed for Indian companies, the sources said the finance ministry suggests policy and RBI considers it and decides the quantum.
"It is the RBI which decides the number," they added.
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By Mr Chitranjan, Section News
Posted on Mon Jul 21, 2008 at 02:27:31 AM EST
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Increase in capital inflow would appreciate the rupee, which generally counters inflation, assuming other factors remain the same.
Inflation is inching towards 12 per cent mark and the government might think of various options to control it, besides raising interest rates and squeezing liquidity.
The government had tightened ECB norms to moderate capital flows, when they were leading to appreciation of the rupee, hurting exports. In August, 2007, it had limited the companies to bring back money raised abroad up to only $20 million for rupee expenditure.
However, that cap was enhanced in May to $100 million for infrastructure companies and $50 million for others. Besides borrowers in the service sector viz hotels, hospitals and software companies were allowed to avail ECB up to $100 million for import of capital goods under the approval route
source: Tribune News Service 20/July/2008
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