Economy: FM hunkers down with RBI, govt
The fall in almost all macro economic data since past week and depreciation of rupee kept the finance ministry officials on their toes on Monday.
Finance Minister P Chidambaram met Prime Minister Manmohan Singh to discuss the economic situation after his return from Washington and the Reserve Bank of India governor D Subbarao made an unscheduled visit to the North Block to deliberate on strategies to tackle the prevailing economic situation.
Later in the day the Prime Minister’s Office informed that it will convene a high-level meeting on Friday to discuss how infrastructure projects can be accelerated. The prime minister is also expected to meet his senior cabinet colleagues on Tuesday to discuss the proposal to hike foreign investment caps in sectors like telecom, retail and defence.
India’s industrial production numbers contracted 1.6 per cent in May, exports declined 4.6 per cent in June, consumer price inflation came back close to 10 per cent in June and wholesale inflation inched close to 5 per cent in the same month. Rupee remained in the touching distance of 60 to a dollar. Manufacturing sector, the backbone of the economy, continued to show weakening signs with auto makers suspending their line of production in the month of July. To put in perspective, all macro-economic indicators suggested the worst is not over for the economy.
“RBI will take into account the inflation figures for monetary policy review,” Subbarao said after meeting finance minister.
The government and the RBI have taken a number of measures to strengthen the rupee in the past weeks, but has so far not yielded desired results. The Indian currency has depreciated 12 per cent over the last two months. To make things worse, prices of crude oil have spiked in the international market posing fresh inflationary problems for India, a net importer of petroleum.
Finance Minister P Chidambaram had discussed the grim economic scenario, specially the weakness in rupee with the prime minister last Monday. The meeting convened by the PMO on July 19 will review progress and award of projects worth Rs 3 lakh crore, including two airports and Eastern Dedicated Freight Corridor.
To be chaired by Principal Secretary to the Prime Minister Pulok Chatterji and attended by secretaries in the departments and ministries of Finance, Economic Affairs, Road, Transport & Highways, Shipping, Civil Aviation and Power besides Railway Board Chairman, the meeting will preparation and award of various projects with an estimated cost of Rs 1 lakh crore.
The Prime Minister will discuss the proposal to hike foreign investment caps with his cabinet colleagues on Tuesday. The other issue is concern raised by Commerce and Industry Ministry on the increasing number of acquisitions of domestic pharma firms by foreign firms.