NEW DELHI: With falling rupee and rising oil prices casting a shadow over Indian economy, Prime Minister Manmohan Singh on Thursday said the country is faced with a difficult economic situation for which some domestic factors too were responsible.
“It cannot be denied that the country is faced with a difficult economic situation,” Singh said after leader of the opposition Arun Jaitley sought his response on the rupee hitting a life-time low.
“There are several causes (for the economic woes). I do not deny some domestic factors too are responsible,” he said.
Listing some of the external factors that have impacted rupee and Indian economy, Singh said US monetary stance and problems created by tensions in Syria and its “inevitable consequences on oil prices” have played their role.
“We have to reckon with these uncertainties,” he said, adding he needed “sometime to reflect” on these.
“I would be happy to make a statement tomorrow,” the Prime Minister said.
Earlier, when the House met for the day, Jaitley raised the issue of depleting value of the rupee, which has fallen 20 per cent against the US dollar this year and already breached 68 mark.
He said there was “panic” in the country as people don’t know where the devaluation of the rupee will stop.
Inflationary pressure will be twice as rising food prices will be coupled with imported inflation in form of rising oil prices in the international market, he said.
Manufacturing growth has been low while services sector has seen expansion drop to 7 per cent from 10 per cent earlier. “In situation like this, what is that government is going to do,” he asked.
Jaitley said finance minister P Chidambaram’s 10-point plan is economic theory as everyone knows that fiscal deficit and current account deficit have to be cut and exports have to be increased.
With economic growth rate falling and inflation ruling high, the country was headed towards stagflation.
Stagflation, a portmanteau of stagnation and inflation, is a term used in economics to describe a situation where an inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high.
The present situation, he said, had arisen because economic prudence has been made subservient to populism.
While crude oil and edible oil are essential imports, $20 billion was spent on importing coal despite the country having coal reserves in excess of demand.
“It is a panic situation … we want to know from Prime Minister what Prime Minister has in his mind for reviving the situation. In a democracy, the buck stops at the Prime Minister and not disappear,” he said. “Prime Minister must take the House and the country into confidence.”
Sitaram Yechury (CPM) wanted to know if after 22 years of reforms under Manmohan Singh, the country has come back to square one.
Parties attack government over sliding rupee in Lok Sabha
Political parties slammed the government in the Lok Sabha over the sliding rupee, which has breached the Rs 68 to a US dollar mark, and demanded that Prime Minister Manmohan Singh make a statement on the issue.
When the House met for the day, leader of the opposition Sushma Swaraj sought Speaker Meira Kumar’s permission to speak during question hour on the continuous fall in the value of the rupee.
“Day before yesterday there was a debate in the House on the state of the economy in which the finance minister gave a long speech enumerating 10 steps and maintained that if these are implemented the economy will improve. After this the confidence of the country and the investors should have increased by at least 10-20 paise but it has actually fallen,” Swaraj said.
“The country’s reputation is attached to the rupee … We want a statement from the Prime Minister, who is a renowned economist. Those having PhDs in economics are not able to handle the economy,” she said, adding the PM should clarify whether the rupee slide will stop or it will continue to fall.
SP chief Mulayam Singh Yadav held the government responsible for the slide in the rupee. He said some fall in the rupee over a period of time is understandable but it has continuously gone down.
“This is due to the wrong policies of the government. The budget of this year was also against the policies,” he said, adding that in 1991, India had to pledge gold and today the world is eyeing India’s gold again.
Sougat Roy (TMC), who had given notice for an adjournment motion to discuss the devaluation of the rupee, said the “drastic fall in the rupee’s value is causing concern at the national and the international level”.
TOI
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