(Releads with cabinet decisions)
By Nigam Prusty
NEW DELHI, Sept 12 (Reuters) - India's cabinet has approved
a plan that will allow it to borrow an additional $4.3 billion
from the World Bank by investing in special bonds, but could not
agree on an increase in taxes on cotton exports, a minister said
Ministers also gave conditional approval to a long-delayed
plan to build two semiconductor factories with state subsidies,
Information and Broadcasting Minister Manish Tiwari said, an
effort to rein in expensive electronics imports longer term.
The steps come as India strives to bring in capital and
stabilise the rupee currency, which hit a record low last month.
New Delhi also needs to boost exports and cut imports to narrow
the world's third-largest current account deficit.
Under the borrowing plan, India's central bank will invest
in bonds issued by the International Bank of Reconstruction and
Development (IBRD), a World Bank subsidiary that lends to middle
income countries, and in return the government will be able to
borrow the additional funds.
The borrowing arrangement allows India to circumvent the
$17.5 billion limit it has with the IBRD, giving it access to
more development financing at a time the country is hungry for
capital inflows to stabilize the volatile rupee currency.
The cabinet failed to agree on imposing a 10 percent duty on
cotton exports, which would have favoured value-added textile
exports from domestic mills and could have boosted flagging
global cotton prices.
A government official said the agriculture ministry opposed
the move, which would hurt cotton farmers.
India is the second-biggest cotton producer after China and
earned about $8.94 billion from cotton exports in 2012/13,
equivalent to some 2.92 percent of total goods exports.
The semiconductor factories will need some $4 billion in
investment and media reports have named IBM and
STMicroelectronics among potential investors.
IBM and STMicroelectronics declined to comment on Thursday.
Israeli chipmaker TowerJazz has said it has
submitted a bid with two partners to build a plant in India.
India's demand for electronics products is forecast to rise
nearly 10 times during the current decade to reach $400 billion
Policymakers have said the electronics import bill could
surpass that of oil due to lack of major local manufacturing.
As sales of smartphones, computers and television sets
surge, annual imports of semiconductors is expected to touch $50
billion by 2020 from $7 billion in 2010.
($1 = 63.3050 Indian rupees)
(Additional reporting by Devidutta Tripathy, Mayank Bhardwaj,
Manoj Kumar, Meenakshi Sharma and Harichandan Arakali; Editing
by Jason Neely/Catherine Evans)