**Executive Summary**
This Office Memorandum, dated August 21, 2019, circulates the unclassified portion of the Monthly Summary on important policy decisions pertaining to the Department of Economic Affairs (DEA) for the month of July 2019. It covers macro-economic overviews and other important developments.
**Key Points / Main Content**
* **Macro-economic Overview (July 2019):**
* Headline inflation (CPI) was 3.2%, compared to 4.9% in June 2018.
* Inflation based on Wholesale Price Index (WPI) stood at 2.0%, compared to 5.7% in June 2018.
* The base rate for scheduled commercial banks stood at 8.85/9.40% as on 19th July, 2019.
* The yield on 10-Year Government securities stood at 6.45% on 19th July, 2019.
* Current Account Deficit increased to US$ 57.2 billion (2.1% of GDP).
* Foreign exchange reserves stood at US$ 430.4 billion as on 19th July, 2019.
* The average monthly exchange rate of rupee was Rs. 68.81 per US dollar.
* Index of Industrial Production (IIP) recorded a growth of 3.1%.
* India's merchandise exports during June 2019 were valued at US$ 25.0 billion.
* India's Imports during June 2019 were valued at US$ 40.3 billion.
* The trade deficit for June 2019 was estimated at US$ 15.3 billion.
* Exports & Import of services during May 2019 were valued at US$ 18.7 billion and US$ 12.5 billion.
* **External Commercial Borrowings (ECB) Framework Liberalization:**
* RBI allowed eligible borrowers to raise ECBs for specific purposes from recognized lenders (excluding foreign branches/overseas subsidiaries of Indian banks) with certain maturity requirements.
* 10-year minimum maturity for working capital and general corporate purposes (including NBFCs on-lending).
* 7-year minimum maturity for repayment of Rupee loans for capital expenditure or NBFCs on-lending.
* 10-year minimum maturity to repay Rupee loans not for capital expenditure or for NBFCs on-lending.
* Eligible corporates can use ECB to repay Rupee loans for capital expenditure in manufacturing and infrastructure if classified as SMA-2 or NPA, under one-time settlement.
* **Other Developments:**
* Bilateral meeting with Cambodia and teleconference with Russia regarding Bilateral Investment Treaties (BIT).
* DEA participated in the Working Group on Investment (WGI) in the 27th Round of the RCEP Meeting.
* Board Meetings of NIIF Limited and NIIF Trustee Limited were held.
* Receipt of report and draft bill regarding virtual currencies acknowledged and published on DEA website.
* Lines of Credit (LoC) extended to DR Congo and Uzbekistan.
* AS (FB&ADB) chaired meetings regarding the Screening Committee of DEA and the issue of Refund of IGST on imports.
* Minimum Government, Maximum Governance approach encouraged, particularly the use of ICT.
* 04 FDI proposals cleared, 07 awaiting approval.
**Impact Analysis**
* **Borrowers:**
* **Impact:** Now have more flexibility in raising funds through ECBs for various purposes with relaxed restrictions and varying maturity requirements.
* **Action Required:** Evaluate the new ECB guidelines and assess eligibility for raising funds under the revised framework.
* **Recognized Lenders (excluding foreign branches/overseas subsidiaries of Indian banks):**
* **Impact:** Potential for increased lending opportunities through ECBs, but must adhere to the new guidelines and maturity requirements.
* **Action Required:** Understand the revised ECB framework and adjust lending strategies to align with the new regulations.
* **National Infrastructure and Investment Fund (NIIF) Limited and NIIF Trustee Limited:**
* **Impact:** The entities oversee and manage investments. The details of the board meetings were not provided in this document.
* **Action Required:** The details of the board meetings were not provided in this document.
Key Entities Referenced
Department of Economic Affairs (DEA): The primary subject of the memo, involved in policy decisions related to the Indian economy.
External Commercial Borrowings (ECB): A framework liberalized by RBI in consultation with the government regarding overseas financing.
Reserve Bank of India (RBI): Consulted by the government in liberalizing the ECB framework.
New Delhi: Location where meetings took place.
No. A-45011/2/2019-Admn. TTT
Government of India
Ministry of Finance
(Department of Economic Affairs)
eek
New Delhi, 21" August, 2019
OFFICE MEMORANDUM
The undersigned is directed to circulate herewith the unclassified portion of Monthly
Summary on important policy decisions in respect of Department of Economic Affairs for the
Month of July, 2019.
To
CONT
(Surinder Pal cinch a)
Jt.
wre
10.
12,
hs Geeretary to the Government of India
Tel No. 23092100
All Members of the Union Council of Ministers, Government of India, New Delhi.
Secretary to the President of India, Rashtrapati Bhavan, New Delhi.
Secretary to the Vice-President of India, 6, Maulana Azad Road, New Delhi.
Chairman, Union Public Service Commission, Dholpur House, New Delhi.
Private Secretary to the Prime Minister, PMO, South Block, New Delhi.
Private Secretary to Cabinet Secretary, Cabinet Secretariat, Rashtrapati Bhavan, New Delhi.
Vice Chairman, Niti Aayog, Yojna Bhawan, New Delhi.
All Members of Niti Aayog, Yojna Bhawan, New Delhi.
Secretaries to all the Ministries/Departments, Government of India, New Delhi.
PPS to Secretary (EA), PPS to Secretary (Revenue), PPS to Secretary (Expenditure), OSD to
MOS (F).
Chief Economic Adviser, DEA.
Additional Secretary (Shri A. Giridhar) Cabinet Secretariat, Rashtrapati Bhavan, New Delhi.
Az. Dr. C.S. Mohapatra, Additional Secretary, DEA
13. Additional Secretary (FB& ADB), DEA
14. AS&FA(Finance).
ASS Shri Sanjeev Sanyal, Principal Economic Adviser, DEA
16. All Heads of Divisions in Department of Economic Affairs.
JS(Budget)/JS(C&C/UN&OMI/IS(UIPFV/IS(FMY IS(BC&IER)VAdviser(IERV CAAA.
17. Ms. Rajasree Ray, Adviser, DEA.
18. Dr. Shashank Saksena, Adviser (FSRL), DEA
19. Shri Arun Kumar, Adviser, DEA
20. Guard File — 2019.No.A-45011/2/2019-Admn.III
Government of India
Ministry of Finance
(Department of Economic Affairs)
Ee
Subject: Monthly Summary on important policy decisions pertaining to DEA for the
month of July, 2019.
1. Macro-economic Overview
1,1 Headline inflation based on Consumer Price Index (New Series-Combined) in June 2019 was
3.2 % as compared to 4.9 % in June, 2018. Inflation based on Wholesale Price Index (WPI) stood at 2.0
% in June, 2019 as compared to 5,7 % in June, 2018.
12 The base rate for scheduled commercial banks stood at 8.85/9.40 % as on 19th July, 2019
compared to 8.75/9.45 % of 20th July, 2018. The yield on 10-Year Government securities stood at 6.45
% on 19th July, 2019 compared to 7.78 % of 20th July, 2018.
1.3 The Current Account Deficit increased to US$ $7.2 billion (2.1 % of GDP) in 2018-19 from
US$ 48.7 billion (1.8 % of GDP) in 2017-18 on the back of widening of the trade deficit. India’s trade
deficit increased to US$ 180.3 billion in 2018-19 from US$ 160.0 billion in 2017-18. Net invisible
receipts were higher in 2018-19 mainly due to increase in net services earnings to US$ 81.9 billion as
compared to US$ 77.6 billion in 2017-18 and private transfer receipts to US$ 70.6 billion in 2018-19.
Net FDI inflows at US$ 30.7 billion in 2018 -19, were marginally higher than US$ 30.3 billion in 2017-
18. Portfolio investment recorded a net outflow of US$ 2.4 billion in 2018-19 as against an inflow of
US$ 22.1 billion a year ago. In 2018-19, there was a depletion of US$ 3.3 billion of the foreign exchange
reserves (on a BoP basis).
1.4 India’s Foreign exchange reserves stood at US$ 430.4 billion as on 19th July, 2019, showing an
increase of US$ 17.5 billion over the level of US$ 412.9 billion at end-March 2019. The average
monthly exchange rate of rupee (reference rate) for the month of July 2019 was Rs. 68.81 per US dollar
as against Rs 69.44 per US dollar in June 2019.
1.5 As per the Quick Estimates released by the CSO (based on new series of 201 1-12), the Index of
Industrial Production (IP) recorded a growth of 3.1% in May, 2019 as compared to the growth of 3.8
% in May, 2018. Eight Core Industries registered a growth of 0.2 % in June, 2019 as compared to
7.8 % in June, 2018. The growth of core industries during April- June, 2019-20 is 3.5 % as compared to
5.5 % during April- June, 2018-19.
1.6 India’s merchandise exports during June 2019 were valued at US$ 25.0 billion as compared to
USS 27.7 billion during June 2018, exhibiting a decline of 9.7 %. India’s Imports during June 2019 were
valued at US$ 40.3 billion which declined by 9.1 % over the level of imports valued at US $ 44.3 billion
in June 2018. India’s oil imports during June 2019 were valued at US$ 11.0 billion which was 13.3 %
lower as compared to US$ 12.7 billion in June 2018.
Contd./-1.7 The trade deficit for June 2019 was estimated at US$ 15.3 billion as against the deficit of US$
16.6 billion during June 2018.
1.8 Exports & Import of services during May 2019 were valued at US$ 18.7 billion and US$ 12.5
billion. Trade balance in Services for May 2019 was estimated at US$ 6.2 Billion.
2, Other important Developments
2.1(a) With a view to further liberalizing the External Commercial Borrowings (ECB) framework, RBI in
consultation with the Government of India, on 30" July, 2019, allowed eligible borrowers to raise ECBs
for the following purposes from recognized lenders, except foreign branches/overseas subsidiaries of
Indian banks:
i. ECBs with a minimum average maturity period of 10 years for working capital purposes and
general corporate purposes. Borrowing by NBFCs for the above maturity for on-lending for
the above purposes is also permitted. ,
ii. ECBs with a minimum average maturity period of 7 years can be availed by eligible
borrowers for repayment of Rupee loans availed domestically for capital expenditure as also
by NBFCs for on-lending for the same purpose. For repayment of Rupee loans availed
domestically for purposes other than capital expenditure and for on-lending by NBFCs for the
same, the minimum average maturity period of the ECB is required to be 10 years.
iii. Eligible corporate borrowers to avail ECB for repayment of Rupee loans availed domestically
for capital expenditure in manufacturing and infrastructure sector if classified as SMA-2 or
NPA, under any one time settlement with lenders. Lender banks are also permitted to sell,
through assignment, such loans to eligible ECB lenders, except foreign branches/overseas
subsidiaries of Indian banks, provided, the resultant external commercial borrowing complies
with all-in-cost, minimum average maturity period and other relevant norms of the ECB
framework.
(b) Bilateral meeting with Cambodian delegation to resolve the issues raised by Cambodian side on
BIT was held on 3 July, 2019 in North Block, New Delhi.
(c) A teleconference was held on 16 July, 2019 with Russian side to discuss the BIT,
(d) DEA participated in the Working Group on Investment (WGI) in 27" Round of RCEP Meeting in
China during 26-31 July, 2019.
(ec) Board Meeting of NIIF Limited held on 18.07.2019,
(f) Board Meeting of NIIF Trustee Limited held on 24.07.2019.
(g) Government has acknowledged the receipt of the Report and draft Bill of the Inter-ministerial
Committee on Virtual Currencies. A copy of the Report of the Group, along with the Draft Bill
“Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019’ has also been
placed on the website of the Department of Economic Affairs.
Contd...a3
2.2 Following Line of Credit (LoC) was extended during the month:
i. LoC amounting to USD 56.824 million to Government of DR Congo for the 15 MW
Photovoltaic Power Plant and Electrical Network Solar Project at Tshilenge.
ii, LoC amounting to USD 56.824 million has been extended to Government of Govt. of
DR Congo for the project 15 MW Photovoltaic Power Plant and Electrical Network
Solar Project at Gemenai -
;
ili. LoC amounting to USD 26.68 million has been extended to Government of Govt. of DR
Congo for the 10 MW Photovoltaic Power Plant and Electrical Network Solar Project at
Manono,
iv. LoC amounting to USD 40.00 million has been extended to Government of Uzbekistan
for Procurement of defence equipment.
2.3 Following Meetings were held during the month of July 2019:-
i. AS (FB&ADB) chaired the 97" Meeting of the Screening Committee of DEA held on 16 July,
2019.
ii. AS (FB&ADB) chaired a meeting regarding the issue of Refund of IGST on imports held on 1
July, 2019 in New Delhi.
3. Minimum Government, Maximum Governance
In particular, use of ICT in submission of Information is being encouraged.
4. Non-Compliance of ACC directions/orders
Nil
5. FDI proposals cleared during the month and status of FDI proposals awaiting approval in the
Department
Cleared
i 04
Awaiting Approval in the Department: 07
wk