PMO calls for brainstorming on macro-economic concerns

Amid rising oil prices, depleting macroeconomic indicators and foreign investors leaving the country, Prime Minister Narendra Modi's office may soon call a meeting of top policy makers, ministry officials, economists and sectoral analysts to discuss ways to arrest the decline in economy.

The meeting will deliberate on strategies to check the aftermath of oil price rise on other indicators such as rise in prices and investments, a top official said.

Rising fuel prices in India, which have touched an all-time high, is likely to feed into other sectors of the economy and keep the rate of inflation higher in food and non-fuel sectors as well.

Experts have also predicted that retail prices inflation may touch 5% in May, giving a lot of discomfort to common people and increasing pressure on the Reserve Bank of India on the policy rate front.

Foreign investors have already pulled out over $2.60 billion from capital markets barely 20 days into this month as global crude prices skyrocket amid heightened US-Iran tensions. A similar outflow was seen last month from India's debt and equity markets.

Indian rupee, which has already nosedived 68 levels against the dollar last week is expected to come under pressure further if crude prices keep soaring in the coming days.

This will not only impact the oil import bill but also keep up the current account deficit and has a potential to create imbalance in the government's finances.

Adding to worries, India’s foreign exchange reserves have fallen to $417.7 billion as of May 11 from touching a record high of $426.028 billion in mid-April.

Though a top level finance ministry official last week tried to assuage the macro-economic concerns saying even though the oil import bill goes higher by up to $50 billion this fiscal, the government will try and keep under check its fiscal deficit target.

This implies that the government's expenditures will not overshoot its revenues. He also said that the situation is nowhere akin to that of 2013 when investors had fled India in a large number on rising current account deficit worries.

But experts do not agree. According to a Dun & Bradstreet report geopolitical risks, escalating tensions in global trade, volatility in international crude oil prices and sharp depreciation in rupee has underlined the upside risk to inflation.

The RBI has already extended its monetary policy meet by one day to June 6. Earlier the central bank was to meet on June 5 and 6 but now it will meet for three days from June 4 to June 6.

This is the first time that the RBI has increased the duration of the Monetary Policy Committee (MPC) meeting by one day.

Though the central bank has said the dates for the June policy meet have been revised "owing to certain administrative exigencies", sources said the MPC needed an extra day to extensively debate on country's economic situation owing to latest developments on macro front.