By Nigam Prusty
NEW DELHI (Reuters) - The 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 on Thursday.
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 by 2020.
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.
(Additional reporting by Devidutta Tripathy, Mayank Bhardwaj, Manoj Kumar, Meenakshi Sharma and Harichandan Arakali; Editing by Jason Neely/Catherine Evans)