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Fastest Growth for Thailand Economy in Six Quarters
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India to Curb Foreign Borrowing
by Stewart DouglasIndia’s government has today imposed new restrictions on overseas borrowing by local companies to counter a surge of foreign money into the country that has fueled inflation and strengthened the rupee.
Companies wont be allowed to bring more than $20 million in overseas loans into the country, the federal finance ministry under P. Chidambaram said in orders released late Tuesday.
Those bringing in less than that will still need to get the approval of the central bank, as India looks to try to curb the growing inflation problem within their economy.
The ministry’s decision is expected to help weaken the value of rupee and bring relief to high scale exporters and India’s huge, profitable outsourcing industry, where earnings have really been hit by the rupee’s drastic change in recent months.
It indeed cuts out a major portion of the inflows that have contributed to the rupee’s strength, particularly in 2007, Standard Chartered Bank (SCB) said in a note to its clients.
This week, the value of rupee fell 0.3 percent to 40.52 per dollar, good news for Indian exporters who have struggled under the pressures of a strong currency.
The Indian currency has risen more than 10% against the dollar in the past 2 years and reached a nine-year high of 40.20 per dollar in late July.
Indian companies borrowed about $16 billion from overseas in the fiscal year ended this March. This money was on top of a record $15 billion in foreign direct investment and another $7 billion pumped into stocks and bonds, leaving the country with huge foreign exchange reserves and a banking system flush with funds.
The problem of excessive dollar supply comes in stark contrast with the recent past, with the country struggling for decades through a shortage of foreign currency after the war with Pakistan.
The measures are hoped to have a direct bearing on inflation, and are designed to curb further price rises across India.
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