Booster dose for economy today, NRI deposit rates may go up
Saddled with depleting foreign reserves and flat industrial production, the government is desperate to start rolling out its stalled reforms agenda in the beginning of the fiscal so that the benefits accrue in 2012-13.
NEW DELHI: Just before resigning as finance minister, Pranab Mukherjee will sign off with a slew of measures on Monday to boost investors' sentiments and open the gates for enhanced capital inflows in a slowing economy.
Though the 77-year-old Mukherjee did not spell out what kind of policy initiatives were on the agenda that could improve the slowdown, senior finance ministry officials said "tough measures" could include decisions such as announcing partial decontrol in diesel, opening foreign direct investment ( FDI) in multi-brand retail and announcing the government's intent to rollout other pending reforms.
The depreciation of the rupee against the dollar is something that the government needs to fix on an urgent basis as the rupee has lost more than 25% against the dollar in the last one year. Some announcement by the central bank by increasing interest rate on foreign currency deposits by non-resident Indians and issue of short-term bonds for NRIs could help the government stem its further slide.
Though the 77-year-old Mukherjee did not spell out what kind of policy initiatives were on the agenda that could improve the slowdown, senior finance ministry officials said "tough measures" could include decisions such as announcing partial decontrol in diesel, opening foreign direct investment ( FDI) in multi-brand retail and announcing the government's intent to rollout other pending reforms.
The depreciation of the rupee against the dollar is something that the government needs to fix on an urgent basis as the rupee has lost more than 25% against the dollar in the last one year. Some announcement by the central bank by increasing interest rate on foreign currency deposits by non-resident Indians and issue of short-term bonds for NRIs could help the government stem its further slide.
Mukherjee is set to resign as finance minister on June 26 and file his nomination for president on June 28. On Saturday, Mukherjee had said that he had spoken to the RBI governor and the finance secretary and certain corrective measures would be taken. "We will be able to take certain measures to be announced on Monday which will improve market condition," he had said.
Saddled with depleting foreign reserves and flat industrial production, the government is desperate to start rolling out its stalled reforms agenda in the beginning of the fiscal so that the benefits accrue in 2012-13.
Top priority of the government is to check the subsidy bill and contain the fiscal deficit within the target of 5.1% of GDP. Raising of petrol prices in May, aligning it with the international crude prices, was an effort in this direction. Now that international crude prices have moderated, the government may consider raising diesel prices marginally in the next few months and is likely to go in for partial decontrol. Chief economic advisor in the finance ministry Kaushik Basu had last week said the government was working on a partial fuel decontrol regime where subsidy is fixed per litre and any fluctuation and upward increase is passed on to people.
While highlighting the importance of fuel decontrol for fiscal consolidation, Basu said "this is the time partial decontrol regime can be put in place" when international crude prices are much lower than what it was a few months ago.
Saddled with depleting foreign reserves and flat industrial production, the government is desperate to start rolling out its stalled reforms agenda in the beginning of the fiscal so that the benefits accrue in 2012-13.
Top priority of the government is to check the subsidy bill and contain the fiscal deficit within the target of 5.1% of GDP. Raising of petrol prices in May, aligning it with the international crude prices, was an effort in this direction. Now that international crude prices have moderated, the government may consider raising diesel prices marginally in the next few months and is likely to go in for partial decontrol. Chief economic advisor in the finance ministry Kaushik Basu had last week said the government was working on a partial fuel decontrol regime where subsidy is fixed per litre and any fluctuation and upward increase is passed on to people.
While highlighting the importance of fuel decontrol for fiscal consolidation, Basu said "this is the time partial decontrol regime can be put in place" when international crude prices are much lower than what it was a few months ago.
Best Regards
Prakash Nair
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