Market mayhem: PM reviews situation, calls for reforms

Seeking to calm jittery investors after bloodbath on markets, Prime Minister Narendra Modi today vowed to push ahead with reforms agenda and increase public spending as part of drive to strengthen economy.

Modi, who reviewed the crash on stock markets and plunge of rupee with Finance Minister Arun Jaitley and other top officials, underlined that the economy was stable and problem was external and not internal.

Briefing reporters on the review by Modi, Jaitley said the government as well as the regulators Reserve Bank and Sebi were keenly watching global developments but there was no need for bailout package as of now.

Modi was of the opinion that "our economy is stable" but more needed to be done, Jaitley said, adding, "we will keep watching the situation and respond when required."

The review of the economy at the highest level came against the backdrop of benchmark Sensex plunging by 1,624.51 points at 25,741.56 -- its lowest level since August 2014 -- and nearly Rs 7 lakh crore getting wiped out from the investors' wealth.

Besides, the rupee also fell the most in 23 months to hit two-year low of 66.64 against the US dollar. "Prime Minister is of the opinion that in order to further strengthen our economy, we should take more steps," Jaitley said, adding there will be no change in the strategy and the initiative to attract investors would continue.

Jaitley said that further discussions will be held "very shortly" with financial institutions, private and public partners to take "measures to attract investors and use the situation as an opportunity."

The Prime Minister, he said, is keen that the present global crisis should be converted into an opportunity for India.

"We are not talking of any packages as of now as our internal fundamentals like industrial production, capital and public expenditure have improved," Jaitley said, adding normal reforms in the pipeline will continue.

Earlier in the day, Jaitley termed the market crash as "transient and temporary" and expressed the hope that the situation would stabilise as domestic macroeconomic indicators were strong.

"There is not a single domestic factor in India which has either contributed or added to it. These are external factors. I have not the least doubt that this turbulence is transient and temporary in nature. Markets will settle down," he said.

Jaitley said that although the downward trend in the stock markets started on August 11 after devaluation of currency by China, "but we were able to hold on at the last till last week...today we have been quite adversely affected.

"Since China has been contributing 50 per cent to global growth in past few years, it is obvious that uncertainty will shake the market."

He further said that but for the impact of currency and stock markets, "all other parameters are in sound footing. Oil and commodity prices are declining which is favourable."

The Minister stressed that growth projection of 8.1 to 8.5 per cent for the current fiscal, even in this global adversity, was going to be broadly maintained.

"Prime Minister was of the opinion in given scenario we can maintain growth figures at reasonable level...in order to further strengthen economy, we should take steps so that world over crisis can be converted to opportunity for India," he said.

"We are not talking of any package. Our internal situation is strong. We had a reasonable monsoon, services sector is doing well, IIP has picked up and demand will also pick up.

"Public expenditure has significantly improved and therefore there is no payment crisis. As this transient trend calm down a little, it is then for India to convert this into opportunity," Jaitley added.

Jaitley said, "volatility is not going to be everlasting. Volatility is transient." He referred to Rs 9,300 crore garnered through share sale in the IOC today, saying "it was a test on whether we can pull through a major disinvestment."

On the review meeting with the Prime Minister, he said, Modi's positive suggestion was that the economy's intrinsic performance is stable.

"It is not likely to radically change or nosedive... if we can further improve our data, this loss of two-three days we can more than make up for it," he said.

Minister of State for Finance Jayant Sinha said, PM discussed ways to push forward reforms agenda and hoped India will continue to be attractive investment destination. Sinha expected that the market to be volatile for some time.