Global factors behind Rupee fall, no need for knee-jerk reaction: Jaitley

Jaitley says domestic factors strong; hits back at Congress on Rafale

Finance Minister Arun Jaitley said on Wednesday that the upheaval in oil prices and the rupee was due to global factors, and the government will not take any decision out of panic that could be misconstrued as a ‘knee-jerk’ reaction.

Jaitley was addressing a press conference – his first after his recovery from a kidney transplant surgery – after a meeting of the Union Cabinet. His comments come even as prices of petrol and diesel have reached a record high and the rupee has touched a lifetime low of 71.97 versus the dollar.

In the media briefing, Jaitley also hit back at the Congress and its President Rahul Gandhi on their allegations regarding the Rafale fighter jet deal and said the Centre will continue supporting Kerala in its post-flood rehabilitation efforts.

“If you look at the domestic economic situation and the global state of affairs, there’s virtually no domestic reason that can be attributed to the fall in the rupee. The reasons are global. We must bear in mind that in the last few months, the dollar has strengthened against every currency. As far as the comparison with other currencies is concerned, the rupee has always strengthened or remained within range,” Jaitley said.

When questions were asked on global crude oil prices and their impact on petrol and diesel prices, Jaitley said: “We are net buyers of oil and if by creating a shortage oil prices are temporarily raised, that adversely impacts us. That’s an external factor. We are not in the trade war business, but when countries neighbouring us devalue their currencies, it has a corresponding effect on us.”

“Eventually the inherent strength of the Indian economy has to play a very important role. The Reserve Bank of India is doing whatever is necessary to deal with the situation. I don’t think there’s any need for the world’s fastest-growing economy to react adversely,” he said, while replying to questions on the fall in rupee.

The rupee’s unabated fall continued for the sixth straight session on Wednesday, hitting yet another closing low of 71.75, down 17 paise against the US greenback, even as surging oil prices and the weak trend in emerging market currencies weighed on sentiments. Intra-day, the domestic unit plummeted to a historic low of 71.97 a dollar before finding respite, staging some recovery towards the tail-end.

Additionally, Business Standard has learnt that the finance ministry officials have informed the political leadership that any cut in excise duty, despite petrol and diesel prices touching record highs, was ill-advised if the government wanted to stick to fiscal deficit targets. The leadership has also expressed its willingness to ride out any political storm, which was evident from Jaitley’s statements later in the day.

The fiscal deficit target for 2018-19 is 3.3 per cent of gross domestic product. The petrol price in Delhi on Wednesday was Rs 79.4 per litre; for a litre of diesel, one would have to cough up Rs 71.4. The government, however, does not want to take any populist measures — and derail the fiscal deficit target — in an election year. This is important; more so in the light of lower-than-targeted goods and services tax collections so far.

Responding to the Congress allegations on the Rafale fighter jet deal, Jaitley attacked the Congress president for his “immaturity”. He said Gandhi’s immaturity was contagious and affected others in that party. Jaitley rejected the Congress demand for a joint parliamentary committee probe into the Rafale deal. In a reference to the Congress chief, Jaitley said satisfying “the ego of an ill-informed gentleman is not an option.”

In another development, at the Supreme Court, a Bench of Chief Justice Dipak Misra and Justices A M Khanwilkar and D Y Chandrachud considered the submissions of advocate M L Sharma that his plea on the Rafale deal be listed for urgent hearing. The court agreed to hear the plea next week.

National Security Advisor Ajit Doval and Secretary, Defence Production, Ajay Kumar, briefed the Union Council of Ministers on the deal to provide the National Democratic Alliance leaders with facts to counter the allegations of favouritism and graft. Over the past one week, the Congress has held countrywide protests and media briefings on what it calls the “Rafale scam”. The briefing lasted nearly three hours. The ministers were informed that the Rafale contract was a deal between two governments involving no private party, leaving little scope for corruption.

In a related development, the Vice Chief of the Indian Air Force (IAF) endorsed the Rafale fighter jets, saying it will give India an “unprecedented” combat advantage. Air Marshal S B Deo, the Vice Chief of the IAF, said those criticising the deal must understand the procurement norms. “We are waiting for the aircraft to come. It is a beautiful aircraft. It is a very capable aircraft. It is a capability that we need quickly,” he said.

In the afternoon, the Congress party accused the Modi government of adopting “double standards” on defence deals. Congress spokesperson Abhishek Manu Singhvi said when the government has disapproved Russia’s move to grant offset contracts to a private player for manufacture of AK-103 rifles in India, why is it that the Modi government has a different yardstick for the Rafale fighter jet deal by giving the offset contract to a private company?

Singhvi said the Modi government reportedly advised Russia that its firm Kalashnikov Concern tie up with the state-run Ordnance Factory Board if it wants its proposal for manufacture of AK-103 assault rifles to be considered by the defence ministry. “Why did it not apply the same principle in the Rafale scam? Why did Modi government not advise Dassault Aviation to negotiate further with government-run Hindustan Aeronautics (HAL)?” Singhvi asked.

Jaitley accused the Congress of “regressive” vision for protesting the participation of private Indian companies in defence manufacturing. He said opening defence manufacturing to private Indian companies has made it possible for such international defence manufacturers as Boeing and Lockheed Martin to tie up with Indian companies, including the Tatas, Mahindra group, Bharat Forge, and Larsen & Toubro.

Jaitley said the government’s policy was to ensure adequate orders to public sector HAL, but at the same time allow the private sector into the sector. He said the Congress policy was regressive and contradictory since India was buying from private international defence manufacturers, but the Congress will not allow Indian private sector entry into the sector. He pointedly brought up the Bofors scam as well.

Jaitley reiterated that India was getting the 36 Rafale fighter jets 20 per cent cheaper. He said there was no private participation in the 36 Rafale fighter jets, which will be entirely manufactured abroad and flown to India, but the AK-103 rifles will be manufactured in India.