The government on Wednesday said it was open to revisit the restrictions imposed on bringing money raised through Commercial Borrowings (ECBs) to India, erected in the wake of unbridled capital inflows, if the situation that led to rupee appreciation eased.
"Only restriction (on ECB), that we have placed, which I hope would be temporary, is that you must spend the money abroad on capital expenditure... If things get better, we shall certainly revisit these restrictions," Finance Minister P Chidambaram said during his post-Budget interaction with industry body FICCI.
He said restrictions on ECBs were imposed because the government was struggling to moderate capital inflows in most part of last year.
In fact, it is the industry itself which complained about the appreciating rupee, because of which measures were taken to moderate capital inflows, he said, adding that now the industry was complaining about restrictions on these inflows.
"You (the government) are damned if you do, you are damned if you don't do," he said. He asked the industry to understand RBI's compulsions in this regard. "RBI Governor's task is an unenviable task. He has to balance a number of interests, especially containing inflation, managing money supply and maintaining monetary and financial stability. I think RBI has struck a balance (with regard to ECBs)," he said.
The government had announced that not more than $ 20 million raised through ECBs can be brought back to India for rupee expenditure purposes. To remit even $ 20 million, prior approval of the RBI is needed.
To a query that this restriction is hurting small and medium enterprises, Chidambaram asked which small firms need more than $ 20 million or about Rs 80 crore.
