India may lift curbs on external commercial borrowings

Monday, 29 September 2003, 07:00 Hrs
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NEW DELHI: India's forex reserves have crossed an all-time high $88 billion. In an interview with The Economic Times, Singh agreed that it was anomalous that Indian companies were not allowed to access medium or long-term funds from overseas, while foreign institutional investors were permitted to bring in capital.

"The anomaly will not remain for ever," Singh told the newspaper.

Applications of several corporates - Reliance (for $500 mn), ICICI Bank (for $300 mn) and a few public sector power majors - for ECBs totalling over a billion dollars were pending with the finance ministry at present.

"We have discussed the commercial borrowing situation with the Reserve Bank of India (RBI). We don't want to turn commercial borrowings into an unrestrained licence and, in any case, if I find that the limit on external commercial borrowing is becoming a retardant, we can easily alter it," said Singh.

At the same time, the finance minister emphasised that the government was keen to limit the total volume of commercial borrowings that the country had incurred as part of the total debt.

"We are not stopping external commercial borrowings. We have only put a cap on it. This short-term capital brought in by the foreign institutional investors (FIIs) is also manageable. I won't let it turn into a permanent anomaly. There may be a temporary mismatch. We will attend to it," Singh said.

On the issue of growing foreign exchange reserves, Singh said "I want India to feel that we have moved away from an economy of shortage" after a terrible period of want in the 1960s.

"It is a psychological factor also and not just the question of an economically manageable size of forex. I believe very shortly we will grow and, when we grow, we will need funds to import and I don't want to go around the world asking for funds," said Singh.

He added that growth would be fuelled by investment, which, in turn, would generate funds.

The finance minister expressed happiness that both former RBI governor Bimal Jalan and his successor Venugopal Reddy "agree with what I am saying".

As chairman of a group of ministers on privatisation of airports, Singh gave an assurance that speedy decisions would be taken on the matter.

Similarly, on the public private partnerships announced in the budget, Singh said: "We are moving but not at the pace which fills me with satisfaction. But that is a part of the system. I would really be much happier if we had moved with a sense of urgency and despatch."

While road and railway projects were moving ahead in public-private partnership, on airports, too, the effort would be to "reduce the gap between promise and delivery, Singh said.
Source: IANS
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