The Government is likely to review the annual external commercial borrowings (ECB) limit of $30 billion this month end, the Economic Affairs Secretary, Mr R Gopalan, said on Tuesday. India had last raised the ECB limit by $10 billion in May to the current annual cap of $30 billion.
Indian industrialist had met the Finance Minister on August 1 and suggested that the ECB limit be raised further. There was also a suggestion to allow Indian companies to accept China's Renminbi for overseas borrowings.
When asked if the Government plans to raise the annual ECB limit, “There is a meeting at the end of this month,” Mr Gopalan told newspersons on the sidelines of a CII event.
Rising costs
The planned review reflects the increasing demand by firms to raise funds at cheaper rates abroad. India Inc's borrowing costs in the domestic market have been going up over the last one year as the RBI has raised its key policy rates 11 times since March 2010 to tame inflation.
With increased integration of the Indian economy with the global and near-zero interest rates maintained by the developed countries to support their weak growth, Indian companies have been utilising the ECB window to their full advantage.
Between January and July this year, Indian companies had borrowed $20.4 billion through the ECB route.
Continuing with its anti-inflation monetary stance, the Reserve Bank of India is expected to further hike its policy rates at its mid-quarterly monetary policy review slated for September 16. This is despite industrial growth plunging to a 21-month low of 3.3 per cent in July.
Government Borrowing
The Government is not looking to borrow more than what it had initially planned for 2011-12 in February, a senior Finance Ministry official has said. The annual borrowing target for 2011-12 had been pegged at Rs 4,17,000 crore.
Of this borrowing target of Rs 4,17,000 crore, the Government had planned to raise Rs 2,50,000 crore in the first half and the remaining Rs 1,67,000 crore in the second half of the current fiscal. A joint panel of Finance Ministry and RBI officials will meet on October 3 to decide on the borrowing calendar for the second half of the current fiscal.
“As of now, there is no change in the borrowing levels We are meeting on October 3 to decide the schedule for second half,” Mr Gopalan told newspersons on the sidelines of a CII event here.
Mr Gopalan's remarks that Government would stick to its initial plan comes amidst worries that swelling subsidies may force it to borrow more than what was initially proposed to bridge the fiscal deficit. .