Why is it in news?
- Nepal imposed a monthly limit on the amount of Indian currency its citizen can spend in India.
More in news
What it means?
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A Nepali citizen would be unable to spend more than ₹1 lakh per month while paying for goods and services in India and that the decision was taken to address the country’s current account deficit.
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The policy applicable to prepaid, credit and debit cards of Nepali banks.
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The decision to cap individual spending came two weeks after Nepal formally banned high denomination Indian currency notes.
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Why such a move by Nepal?
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The decision was taken to deal with the growing problem of current account deficit and the balance of payment crisis.
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Demonetisation impact on Nepal:
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India’s demonetisation had created a negative sentiment in Nepal and by taking charge of its currency, Kathmandu wanted to secure itself against any future Indian moves.
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Nepal had acted without consulting India on this issue as there was a sentiment in the country that it should take control of its own currency and secure it from any future action like the demonetisation.
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What are its repercussions?
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Apart from impacting the spending trends of Nepali consumers and tourists in India, capping expenditure is also expected to influence trade in the India-Nepal border areas where Nepali businessmen usually pay in Indian currency.
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Series of events:
Source
The Hindu