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Oct 16, 2018-

That the Finance minister’s tweet after having briefed a press conference on his dubious plan to reduce oil prices by Rs 2.50 a litre should have been met by derision was only to be expected given that he had very recently argued that oil prices were not under his control. His sense of smugness over the proposed reduction too was somewhat punctured by his followers who held that having allowed Mumbai oil prices, for instance, to rise from Rs 76.98 per litre around September 8 to Rs 87.73 per litre on October 10, there was no case for Mr Arun Jaitley to take credit for a Rs 2.50 cut The combined OMC loss of Rs 39,000 crore in market capitalisation last week, accompanied by an 800-point drop in the BSE Sensex and the rupee sinking to new lows have the economy gasping. Worse may follow with the net collective OMC hit in the next two quarters estimated at Rs 9,000 crore. The larger question is how it all impacts the fiscal deficit because the government cannot possibly handle twin deficits; the current account deficit (CAD) is already daunting. Moody’s has gone public with a projected slippage vis-à-vis fiscal deficit from 3.3 per cent to 3.4 per cent, following the fuel excise duty cut. Given the palpable headwinds on the external front, the convoluted trade regime, India’s worrisome debt burden—private debt in 2017 at 54.5 per cent of the GDP and general government debt at 70.4 per cent—the walls are closing in on the economy.

Published: 16-10-2018 09:21

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