Non-essential imports to be cut to stabilise rupee

The Centre on Friday decided to cut all “non-essential” imports and take steps to increase exports after a disbalance in trade impacted the rupee and widened current account deficit.

The items on which the imports are going to be halted will be decided by the ministries concerned, Finance Minister Arun Jaitley said in a late evening press briefing after Prime Minister Narendra Modi took stock of the economic situation.

The meeting came after the Reserve Bank of India (RBI) reported a dip in the foreign exchange reserves to $399.28 billion. The reserves had hit a historic high of $425 billion in April. This is for the first time the forex reserves have breached the $400-billion mark in the current financial year.

The RBI on Friday reported the slide in reserves for the week ending September 7. Market watchers said the intervention of RBI to support the rupee could have resulted in such a steep fall this year. The rupee has fallen close to 13% from February this year, weighed down by high crude oil prices. The depreciating rupee in turn impacted the current account deficit (CAD).

Jaitley said it was the deficit on India’s current account that needed immediate attention.

The current account deficit is a measurement of a country’s trade where the value of the goods and services it imports exceeds the value of the goods and services it exports.

On the rise in petrol and diesel prices, Jaitley remained non-committal and said the government did not want to widen the gap between its expenditure and revenues.

“Our main aim should be to maintain the fiscal deficit at the level it is today,” Jaitley said, implying the Centre has not taken any decision on rising petrol and diesel prices at Friday’s review meeting.

If the government moves the needle on oil prices, its fiscal math is expected to be impacted badly.

RBI Governor Urjit Patel gave a presentation at the meeting on the state of global economy and its impact on India and its currency. He said that India’s fundamentals remained strong and only the global headwinds and the looming trade war impacted the country temporarily.

“Our growth rate is high, inflation is moderate and fundamentals strong,” the RBI governor said in his presentation, suggesting that the government stay on the course of reforms.