Published: Sun, September 16, 2018
Finance | By Loren Pratt

PM Modi reviews economy with Jaitley as rupee weakens, fuel prices soar

PM Modi reviews economy with Jaitley as rupee weakens, fuel prices soar

PM Modi's review meet analyse the health of the economy, deliberate intervention measures.

The rupee jumped most in three weeks after unnamed government officials said the Prime Minister would review the economic situation this weekend and announce measures to curb the decline in the rupee and also rising oil prices.

Economic Affairs Secretary Subhash Chandra Garg said the government and the RBI would do everything to ensure that rupee does not slide to 'unreasonable levels'.

Fiscal and monetary measures can not be ruled out after the review meeting, nor a rate hike by the central bank, television channels said earlier in the day, prompting a recovery in rupee from record lows.

While the structure of the meeting is not known, it may review macroeconomic indicators, government finances and implementation of flagship financial inclusion and other development schemes, they said.

Opposition Congress and the Nationalist Congress Party (NCP) have slammed the BJP-led dispensation over the decision.

The Finance Ministry has ruled out any cut in taxes to ease the burden on consumers, saying it does not have the bandwidth to lose any revenue without developmental spending being cut. The domestic currency is trading at 71.86 against the U.S. dollar, compared to its Wednesday closing of 72.19. The currency closed at 72.18 to a dollar, gaining 0.7% over it's previous close. The government can ill-afford this in an election year.

However, the government has repeatedly said the fuel price hike in the country is due to global factors and the government has no control over it. Fuel prices, too, have been breaking records for some days with petrol selling at Rs 81.28 in Delhi and Rs 88.67 in Mumbai on Friday.

Finance ministry officials said reducing the fiscal deficit may be hard as India heads into election year, but the government could consider raising import duties on some electronic items and ease rules for foreign investors. Exports grew 19 per cent to $27.84 billion while imports rose 25.41 per cent to $45.24 billion.

Also Read | WPI inflation drops to four-month low of 4.53%. Jaitley said that to address the issue of expanding CAD, the government will take steps to cut down non-essential imports and increase exports.

Despite strong economic growth, the rupee has weakened more than 11 percent to become Asia's worst performing currency this year, as India's current account deficit widened, and balance of payments moved into the red as a effect of higher oil global prices and an emerging markets sell-off that has seen portfolio inflows dwindle. "From the Finance Ministry side, we said we believe that maintaining fiscal deficit is of prime importance and our effort is towards the same and we have the confidence that we will maintain it", Jaitley said.

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