India May Allow More Overseas Investment as Rupee at 6-Year Low

India may allow more overseas investments in corporate and government bonds and ease overseas borrowing rules for local companies to boost dollar inflows and shore up the rupee from a six-year low. The finance ministry is considering a proposal to raise the limit on holdings of government bonds by overseas investors from $5 billion and that on corporate bonds from $3 billion, said an official who did not want to be named. A record $9.84 billion sell-off of Indian equities by foreign investors sent the rupee down by 19.2 percent this year, the biggest drop since 1991, draining cash from the financial system and increasing borrowing costs. Finance Minister Palaniappan Chidambaram said today the government will take steps to ``provide liquidity.'' ``It is absolutely necessary to boost dollar inflows,'' said Tapan K. Bhaumik, economist at New Delhi-based JK Organisation, which has investments in tires, cement and paper. ``Else the slide in the rupee will continue.'' The Federal Reserve, European Central Bank and four other central banks today lowered interest rates in an emergency coordinated effort to ease the economic effects of the financial crisis. The U.K. earlier said it will give its banks an unprecedented 50 billion-pound ($87 billion) government lifeline and emergency loans from the central bank to prevent a collapse of its financial system. ``We see in the U.S., in Europe, economies really in the hospital,'' India's Trade Minister Kamal Nath said in New Delhi. ``In India, with strong economic fundamentals, we have the confidence to tide over this global financial crisis.''