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Narendra Modi could host meeting this weekend to review state of economy; may take stock of rupee, fuel price crises

FP Staff
Opposition parties led by Congress have made spiralling fuel prices and plummeting rupee a political issue and questioned the efficacy of the government's economic policies.

Prime Minister Narendra Modi is likely to hold a review meet this weekend to analyse the health of the economy and deliberate if any intervention measures are required to stem the fall of rupee and rising oil prices, sources said.

An increase in interest rate to shore up the rupee is also being talked about in some quarters.

Finance minister Arun Jaitley, NITI Aayog Vice-Chairman Rajiv Kumar, PMEAC Chairman Bibek Debroy and finance secretary Hasmukh Adhia are among the officials who are likely to attend the meeting, sources privy to the development said.

While the structure of the meeting is not known, it may review macroeconomic indicators, government finances and implementation of flagship financial inclusion and other development schemes, they said.

The meeting comes in the backdrop of the Indian currency touching its lifetime low of 72.91 to a dollar, depreciating 12.3 percent since the beginning of 2018.

On Friday, the US dollar ended sharply lower against the rupee at 71.84/85 per dollar at the close of the Interbank Foreign Exchange (forex) market.

Besides having an impact on current account deficit, the nosediving rupee has made imports costlier and led to petrol and diesel prices skyrocketing to record highs.

The finance ministry has ruled out any cut in taxes to ease the burden on consumers, saying it does not have the bandwidth to lose any revenue without developmental spending being cut. The government can ill-afford this in an election year.

Opposition parties led by Congress have made spiralling fuel prices and plummeting rupee a political issue and questioned the efficacy of the government's economic policies.

They have been demanding that the Centre cut excise duty and some of the states ruled by them including Andhra Pradesh and West Bengal have announced measures to cut local taxes.

Petrol and diesel prices Friday scaled new highs as rates were increased on account of rupee depreciation and rise in international oil rates. While petrol price was increased by 28 paise a litre, diesel rates went up by 22 paise, according to a price notification of state-owned oil marketing companies. Petrol in Delhi now costs Rs 81.28 per litre and diesel is priced at Rs 73.30 a litre.

In Mumbai, petrol is retailed at 88.67 per litre, for Rs 84.49 in Chennai and Rs 83.14 in Kolkata. Diesel costs Rs 77.82 per litre in Mumbai, Rs 77.49 per litre in Chennai and Rs 75.36 per litre in Kolkata, according to the notification.

Every Rs 2 cut in price of petrol and diesel would lead to a revenue loss of around Rs 30,000 crore, as per ministry estimates.

The government has so far maintained that it would not take any knee-jerk action as a response to the fall in rupee or spike in fuel prices.

Data from the Commerce Ministry has shown better than expected trade deficit at $17.40 billion in August, down from $18.02 billion a month ago. Exports grew 19.21 percent to $27.84 billion while imports rose 25.41 percent to $45.24 billion.

Also, boosting the government was retail inflation rate easing to a 10-month low of 3.69 percent in August.

Sources said while the Centre has virtually ruled out a cut in excise duty, saying that it would mean that a commensurate reduction in developmental expenditure has to be undertaken to keep the fiscal deficit at the budgeted level, it is up to the states to reduce VAT on petrol and diesel.

The retail price of petrol and diesel is arrived at after adding excise duty, which is charged by the Central government, commission paid to petrol pumps dealers and VAT, charged by the state governments.

While Brent crude oil price is hovering at around $79 a barrel, the relentless slide in rupee has put pressure on the oil import bill.

The Current Account Deficit (CAD), which is the difference between inflow and outflow of foreign exchange, rose to $18 billion or 2.4 percent of GDP in the April-June quarter on account widening trade deficit.

With PTI inputs

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