Prime Minister Narendra Modi is expected to undertake a high-level review of country's economic situation by the end of this week amid falling rupee and rising prices of petrol and diesel leading to an increase in the prices of essential commodities.
Elevated prices of oil have also threatened to dis-balance the government's finances and could have a significant impact on the current account deficit going forward as India is the net importer of crude oil.
The government data last week showed the CAD widening to a five-year high. A high CAD and high oil prices have exerted further pressure on the rupee. The rising rupee has forced the RBI to sell dollars off and on to arrest the rupee volatility leading to a drop in reserves from around $425 billion in the beginning of the fiscal 2019 to $400 billion now.
The prime minister, along with other high-level officials and economists, is expected to discuss measures to arrest the rupee fall and rise in prices of essential commodities. The meeting will also focus on steps to increase India's exports. The review meeting may be undertaken on Saturday or Sunday.
A top finance ministry official said the government may take the help of India's overseas citizens to check the rupee slide. The official, who did not wish to be named said the government may issue NRI Bonds or foreign currency non-resident deposits, which have in the past mopped up dollars to support the rupee.
The official said that the government announce some measures to arrest the fall of rupee and check a further dent in CAD.
It is not clear what measures will be discussed in the meeting on petrol and diesel front but the official said the government is aware of rising prices of other commodities due to rise in diesel prices.
An excise duty cut on petrol and diesel can disturb the government's fiscal math. A number of states like Kerala, Bihar and Punjab, which are facing revenue shortage may not even be asked to cut VAT at this stage. The only option left with the government at the moment is to ask the oil marketing companies to a take a temporary hit.
“Rising oil prices have not only disturbed CAD but also affected people's life. Oil is not in our hands,” the official said adding in an election year, the spending cut is not an option.
Principal Economic Advisor Sanjeev Sanyal, PMEAC Chairman Bibek Debroy and Niti Aayog vice chairman Rajiv Kumar, among others may attend the meeting.