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Faced with a high current account deficit and a depreciating rupee, the government is working on various measures to resolve the macroeconomic crisis. Prime Minister Manmohan Singh is being updated on the economic situation on a regular basis.
Recently, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Economic Affairs Secretary Arvind Mayaram visited Kuwait to attract investments from sovereign wealth funds in that country, said those in the know. The finance ministry is planning more road shows abroad to project India as an investment destination. Finance Minister P Chidambaram has already met investors in Tokyo, Singapore, Hong Kong, Europe, west Asia and the US. He is likely to visit Australia as well as a few more countries in west Asia. These visits are likely at the end of the monsoon session of Parliament, likely during August 5-25.
Key government functionaries - Chief Economic Advisor Raghuram Rajan, Planning Commission member Saumitra Chaudhuri and Mayaram - are coordinating on a near-daily basis to arrive at resolutions to the country's economic woes. Incidentally, all the three are in the race for the Reserve Bank of India (RBI) governor's post, slated to fall vacant on September 5. Incumbent D Subbarao, whose term might be extended, is coordinating efforts from the central bank. Last week, the central bank announced measures to tighten liquidity.
Officials in the know said the Planning Commission was preparing daily analyses of the rupee and framing strategies to correct the currency's fall. The commission's reports are being sent either on a daily basis or in two-three days to the finance ministry, the Prime Minister's Office and RBI. This followed pressure on the balance-of-payment (BoP) situation from the government's high current account deficit, as well as the fall in the rupee.
"There is some pressure on BoP, but it is not of the same magnitude as in 1991 by any stretch of imagination," said a senior government official.
While RBI has announced a few short-term measures, it may also announce steps to attract foreign portfolio investment over the medium term. As part of long-term measures, the government is trying to draw more foreign direct investment (FDI) into the country and is holding talks with major investors abroad. Chidambaram has already apprised investors in the US of the Mayaram committee's recommendations on lifting FDI caps in various sectors. Earlier this week, the Cabinet had raised FDI caps on telecom, asset reconstruction companies and defence production. On Friday, the prime minister had said more FDI reforms were on the cards.
