Indian rupee fall: Govt may ease rules for sovereign wealth funds
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India's finance ministry, the central bank and market regulators on Monday discussed loosening rules for investment by foreign sovereign wealth funds in response to a sharply falling rupee and a wide current account deficit that are hurting the economy.
Two senior ministry officials, who declined to be named, said the aim was to attract more capital flows from wealth funds in Middle East countries. Finance Minister P Chidambaram has visited the Middle East in recent months to drum up investment.
"We will again meet and it will take some more time to finalize measures on sovereign funds," said one official who attended the meeting.
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India's rupee hit a record low of 57.76 against the dollar on Monday, escalating worries about the country's current account deficit and complicating the task of the central bank as it tries to loosen monetary conditions to spur an economic recovery.
The meeting on Monday was arranged prior to the record being hit.
Another senior official at the ministry said the government was taking all possible steps to "calm" markets and was committed to reining in the current account deficit.
He said government plans to raise the cap on investment by foreign institutional investors (FII) by five billion dollars in government debt has been put on hold, because money was currently flowing out of India.
"The FII capital outflows are likely to continue for next 10-15 days," he said adding he feared the rupee could touch 58 or 59 against the dollar if the outflows continued.
He blamed the outflows on investor perceptions that the United States is preparing to tighten monetary policy through a rollback of its quantitative easing programme.