Another set of measures just to boost the market sentiment or genuine steps to revive a sagging economy? What are likely items on the menu of Finance Minister Pranab Mukherjee when he announces his measures today?
Media reports speculate they are going to be a mix of both.
With the rupee continuing its free fall, the government and the Reserve Bank of India, though not sharing a cosy friendship always, are likely to take steps to attract foreign capital.
An Economic Times report said the government is likely to increase the foreign investment limit in the corporate and government bonds and decrease the limit in the infrastructure bonds.
Another report in the Business Standard suggests the RBI is likely to announce steps in line with those taken in May.
In May, the central bank had increased interest rates on foreign currency non-resident bank (FCNR (B)) deposits. It had also announced steps to increase availability of export credit in foreign currency.
The public, however, may be in for a crude shock, as the government is also likely to announce an increase in diesel price. The fuel price increase may definitely have an adverse impact on the already high prices of vegetables and other commodities.
However, the government is hard pressed to cut fuel subsidy.
The finance minister, widely discredited for watching the downward spiral of the economy without taking much steps, has been getting a lot of negative publicity after rating agencies warned of a looming economic disaster.
Taking stock of Pranab Mukherjee’s term, former finance minister Yashwant Sinha writes in an article in the Economic Times that “there is no doubt that Pranab Mukherjee has been failure as finance minister”.
While Sinha’s article is right in observing that the most worrying factor now is that the government is in total denial, one wonders whether Sinha would have bitten the bullet had he been in Pranab’s position.