The Reserve Bank of India has relaxed norms for money to flow out of the country.
This is an acknowledged attempt at relieving the upward pressure on the Indian Rupee (INR) in the foreign exchange market.
Specifically
a) Companies can now invest 4 times their net worth in overseas joint ventures
b) Mutual Funds are now allowed to invest upto $5 bn abroad instead of the current limit of $4 bn
c) ECB repayments would now be allowed upto $500 mn instead of $400 mn
d) Individuals can now remit $200,000 without any questions asked instead of the current $100, 000
e) Companies can now invest 50 percent of their net worth in portfolio investments abroad. Additionally the 10% reciprocal holding requirement has been dispensed with.
While these moves may have a temporary effect, the central bank should realise that given the relative attractiveness for money to come into rather than go out of the country, these measures would hardly yield long term lasting results. In any case the only significant measures are the first and the last ones listed above.
I call this one more half baked attempt at micro management. Let’s wait and see how the market reacts.