New Delhi, June 25
The central bank and the government today announced a series of measures to increase capital inflow in the debt market to bolster the plunging rupee, but the markets were disappointed as they were expecting a broad-based package to boost economy.

The rupee has been in a free fall mode for several weeks now and the measures announced today followed announcements made by Finance Minister Pranab Mukherjee in Kolkata over the weekend. The announcements by the Finance Minister, who will be stepping down tomorrow, were construed by the markets and observers as if a big bang economic reforms package was on its way just before Mukherjee’s departure from North Block.

The huge expectations of the markets led to a disappointment as what was announced today was basically a rupee package.

Though the stock markets and the rupee were both strong in the morning with the rupee gaining as much as 70 paise, they slid in the afternoon after the announcement.

The Finance Ministry and the RBI working in tandem liberalised policies relating to investments by FIIs in various debt instruments like government securities, corporate bonds, long-term infrastructure bonds and overseas borrowings of Indian companies.

The RBI hiked the investment limit for FIIs in government debt by $5 billion to $20 billion. It also allowed Indian companies in manufacturing and infrastructure sector and having foreign exchange earnings to take overseas borrowings, also called external commercial borrowing (ECB), for repayment of outstanding rupee loans towards capital expenditure and fresh rupee capital expenditure under the approval route. The overall ceiling for such ECBs would be $10 billion.

In order to widen the non-resident investor base for government securities, sovereign wealth funds (SWFs), multilateral agencies, endowment funds, insurance funds, pension funds and foreign central banks can invest in government bonds for the entire limit of $20 billion.