The government on Friday announced a slew of measures in a bid to contain the widening Current Account Deficit (CAD), check the slide of rupee against the dollar, and address the condition of the economy.

The measures include removal of withholding tax on rupee-denominated bonds, popularly known as Masala bonds, relaxation for FPIs, and curbs on non-essential imports. The decisions were taken at a meeting chaired by Prime Minister Narendra Modi to review the prevailing economic concerns.

The five steps unveiled to boost capital flows include a review of mandatory hedging conditions for infrastructure loans and permitting manufacturing sector entities to avail of external commercial borrowing up to USD 50 million with a minimum maturity of one year, scrapping withholding tax on masala bonds, rupee-denominated debt sold overseas, and relaxations in the overseas debt regime.

Doing away with mandatory hedging, for now, will reduce demand for dollars.

Modi was briefed by Reserve Bank of India (RBI) governor Urjit Patel and finance ministry officials, finance minister Arun Jaitley told reporters after the meeting on Friday.

The measures are likely to have a positive impact to the tune of USD 8-10 billion, Economic Affairs Secretary SC Garg said. “It is difficult to give a specific number. I think it should have an impact of USD 8-10 billion,” he said.

Jaitley, briefing the media after the meeting, said the government has decided on ‘five steps’ to contain CAD which widened to 2.4 per cent of the GDP in the first quarter of 2018-19.

Several issues were discussed during the meeting and decisions on those are likely in the next few days. More issues would be discussed in the meeting with the Prime Minister on Saturday, said Jaitley.

Jaitley added that external factors like US policies, trade war, and crude oil prices are impacting economies like India.

However, “there are some issues on which immediate action is needed,” the minister said while announcing steps to increase the inflow of foreign funds and check CAD.

One of the important decisions is that mandatory hedging condition for infrastructure loans will be reviewed. This relates to external commercial borrowing (ECB). It has also been decided to permit manufacturing entities to avail ECB facility with a minimum maturity of one year, instead of the earlier limit of three years, Jaitley said.

Further, restrictions will be removed with respect to FPI exposure limit of 20 per cent in the corporate bond portfolio to a single corporate group or company or entity and 50 per cent of any issue of corporate bond.

With regards to masala bonds, Jaitley said it has been decided to do away with the withholding tax on bonds issued till March 2019.

Jaitley also informed that restrictions on Indian banks on marketing and under writing of masala bonds would be removed. He further said that the government would restrict the import of non-essential items and encourage exports.

However, he did not disclose the list of non-essential items which would be subject to import restrictions.

“To address the issue of expanding CAD, the government will take necessary steps to cut down non-essential imports and increase exports. The commodities of which imports will be cut down will be decided after consultations with concerned ministries and will be WTO-compliant,” he said.

Jaitley refused to comment to a question on whether NRI bonds would be issued to reduce the rupee depreciation.

(With PTI inputs)