Bikky Khosla | 18 Sep, 2018
Of late, there has
been a growing concern about fundamental of the economy. Fuel prices are going up and the Rupee's
value is tumbling down, both like never before, thereby dominating
headlines across the country. Last week, Opposition parties even called for a
nation-wide strike to protest against high fuel prices. Meanwhile, the Centre, in order to contain the
widening CAD and check the rupee fall, came with an array of measures, but the results are not yet evident. This
situation definitely requires urgent attention.
The steps announced by the Centre last week to contain Rupee
depreciation include removal of withholding tax on Masala bonds, curbs on
non-essential imports and relaxation for Foreign Portfolio Investors. As a
result of the announcement, the currency initially showed some sign of recovery
but to crash again soon. Experts point out that these measures are neither
effective nor appropriate at this stage, amid fund outflow, escalation in global
trade protectionism and high crude prices in the international market.
Meanwhile, domestic fuel prices pose no less a challenge to
the government. Today, one litre of petrol costs Rs 82.16 in New Delhi and Rs
89.54 in Mumbai while diesel prices stand at Rs 73.87/litre and Rs 78.42/litre respectively
in these two cities. Naturally, there has been a popular anger over such high prices,
which last week promoted the Modi government -- which had been so far resisting the
populist trend of cutting fuel prices -- to say that it would soon come up with
an action plan to rein in fuel prices.
Ballooning current account deficit, which stood at 2.4 percent
of the GDP in the first quarter, is another challenge that Centre must require
to address. The Finance Minister recently said the government would stick to
its capital expenditure targets to achieve high growth and maintain the
budgeted 3.3 percent fiscal deficit target in the current year. He, however, parried
reporters' questions on the issue of petroleum prices. It seems the government
is still working on finding out a balanced approach.
I invite your opinions.