PM Modi reviews economy with Jaitley as rupee weakens, fuel prices soar

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As rupee continues to weaken and fuel prices soar to record levels, Prime Minister Narendra Modi on Friday met Finance Minister Arun Jaitley and top Finance Ministry officials to review the economic scenario.

Modi will hold another economic review meeting with key policy makers on Saturday to discuss possible interventions by the government to address the macroeconomic challenges arising out of the depreciating rupee and steep rise in fuel prices.

While Revenue Secretary Hasmukh Adhia and Economic Affairs Secretary Subhash Chandra Garg accompanied Jaitley to the Friday meeting, Expenditure Secretary Ajay Narayan Jha will join the Saturday meeting during which the Prime Minister will also review the budget, informed sources said.

The high-level meeting on Saturday has been called to analyse the economic situation precipitated by record depreciation in rupee and unprecedented rise in fuel prices.

The rupee touched an all-time low of Rs 72.91 per US dollar on Wednesday and closed at Rs 71.85 on Friday. Fuel prices, too, have been breaking records for some days with petrol selling at Rs 81.28 in Delhi and Rs 88.67 in Mumbai on Friday.

The Prime Minister may like to know the possible fiscal and monetary measures that the government can take to improve market confidence and economic scenario, officials said.

On Wednesday, Economic Affairs Secretary Subhash Chandra Garg said the government and Reserve Bank of India (RBI) will take all necessary measures to check the further slide of rupee as there was no fundamental rationale for the rupee to depreciate to these levels.

Garg said the steep depreciation in rupee reflected overreaction of market operators and attributed rupee's correction the same day as proof. Rupee closed at Rs 72.19 per greenback on Wednesday after recovering from its lowest intra-day of Rs 72.91.

Modi is also likely to discuss issues related to fiscal discipline with the policy makers. Considering general elections next summer, some economists have expressed fear against populist measures and hope the government does not cut tax on petrol.

The country's fiscal deficit in the first four months of 2018-19 has already touched 86.5 per cent of the full year's target of Rs 6.24 trillion. On August 31, the Controller General of Accounts (CGA) said the fiscal deficit for April-July was Rs 5.40 trilllion.