NEW DELHI: The Centre is considering relaxing certain provisions under the Foreign Exchange Management Act (FEMA), including reducing the transaction charges in order to attract more remittances, which will help in boosting forex reserves and in controlling the Current Account Deficit (CAD). “The government is taking many steps to narrow CAD. In the coming few days, we will see its impact. One of the suggestions discussed is certain provisions in the FEMA which, if relaxed, will help in boosting the inflow of remittances. We are considering the move, which will help in narrowing CAD,” a senior official from the finance ministry told TNIE.
India’s CAD widened to 2.4 per cent of GDP in April-June, and on Thursday, the rupee closed at Rs 74.12 per dollar. On Friday, the Prime Minister took stock of the economic situation, specifically concerning the oil price and its impact on CAD. Sources added that the meeting was attended by officials from the finance ministry and the petroleum ministry.
According to the Reserve Bank of India’s data, networkers’ remittances in April-June 2018 were $11.5 billion. According to the World Bank, India was the largest receiver of remittances in 2017, with inflows of $69 billion. The World Bank report had added that three of the five highest cost corridors for sending remittances involved India, from South Africa, Japan and Thailand.
Recently, the government has taken multiple steps to reign in the current account deficit, which, the Centre feels will be higher than expected due to international crude oil prices, which are hovering above the $81 per barrel mark.
Last month, the government had raised import duties on 19 items, including consumer electronics, diamonds, jewellery, jet fuel, and leather footwear, in a bid to curtail non-essential imports and bridge the CAD. On Thursday, the government hiked tariffs on another seven items, including some electronic items.
Earlier this week, Finance Minister Arun Jaitley had said that the current situation was linked more to international factors and the government was taking every possible measure to calm the market and arrest the rupee’s depreciation.