The intrinsic value of the rupee in real effective exchange rate terms could be somewhere between 58 and 60
The government, on Monday, said it was not planning any special stimulus for the corporate sector to tide over the current economic woes.
“I have not heard of any such plan,” Economic Affairs Secretary Arvind Mayaram said on the sidelines of a function here when asked whether the government was working out any stimulus for certain sectors, which are reeling under the impact of slowdown.
There were reports that the Finance Ministry and the Reserve Bank of India (RBI) were working out a special stimulus package to provide funding at lower interest rates to certain key sectors of the economy to boost growth.
Steps to promote infra funding
The government, he said, was working on various steps, including deepening of the bond market and setting up of a fund, to promote debt and equity investment in the infrastructure sector. “In the next 2-3 months, there will be greater deepening of the equity and bond markets for financing of the infrastructure sector,” he added.
On the debt side, the government was making efforts to develop the corporate bond market and encourage the Employees’ Provident Fund Organisation (EPFO) to invest in infrastructure projects, he said. Regretting that the EPFO was not willing to take risk and participate in equity “as the employees do not have appetite for risk,” he said, “we need to build the confidence in them that it is safe investment.’’
On the equity side, Dr. Mayaram said the government would come up with Infrastructure Trust Fund in the next two months. This would be in the nature of Real Estate Investment Trust (REIT), he added. Under the new structure, underlying revenue of a project would be transferred to a trust which would issue units to investors, including foreign investors who wished to buy the units.
Intrinsic value of rupee
The intrinsic value of the rupee in Real Effective Exchange Rate (REER) terms could be somewhere between 58 and 60, Dr. Mayaram said.
The rupee touched an all time low of 68.86 to a dollar last month.
The REER refers to the rate of currency in relation to the value of currencies of major trading partners.
Dr. Mayaram said the demand for bulk diesel was coming down, and it would help the government save about $1 billion this fiscal.
Referring to the impact of tapering of monetary stimulus by the U.S. Federal Reserve, Dr. Mayaram said the government had enough ammunition in its hand to deal with the situation. “I do believe when tapering happens there will be outflow of capital, but the fact also remains that we have enough ammunitions in our hand... And, therefore, there is no room to be fearful of rupee taking a tanking,” he said.
The forex reserves of the country stood at $270 billion, he said, adding if the current trend continued there would be about $40 billion additional inflow of capital this fiscal year.
Dr. Mayaram said foreign direct investment (FDI) this current fiscal was expected to be around $36 billion.
In the first quarter, net FDI flows into the country were at $9 billion, which is 70 per cent higher than FDI inflow in the first quarter of last fiscal. On growth, Dr. Mayaram said, “We are not satisfied with 5 per cent growth rate. India’s potential rate of growth is 8 per cent. In the next two years, India will again start growing at 8 per cent.”
Notwithstanding volatility in the market, he said the government was confident of meeting the Rs.54,000-crore disinvestment target for 2013-14. The government has set a target of Rs.40,000 crore for its stake sale in public sector units (PSUs) and Rs.14,000 crore from selling its shares in private companies.
“We have two kinds of disinvestment. One is disinvestment of government shares in PSUs and other is disinvestment of government shares in private companies. We believe that we will be able to meet that target of Rs.54,000 crore. It could be a little higher in the one or little lesser in the other,” Dr. Mayaram said.