Amidst rising fuel prices, and a falling rupee, Prime Minister Narendra Modi is likely to hold a crucial meeting this weekend to take stock of the economy.

Soon after this news broke, the rupee recovered sharply in trade. At one point it was close to the 73-mark against the dollar. But by the end of the day, it got back close to the 72-mark marking the biggest single-day gain in over 3 months.

The union cabinet also announced a slew of measures to lift the rural economy, a new procurement policy to ensure Minimum Support Price (MSP) to farmers has been cleared and the prices of ethanol has been hiked.

Three macroeconomic indicators are offering some hope to the government--- trade deficit in August has eased marginally but it still remains elevated at over $17 billion.

Retail inflation for August is below 4 percent for the first time in over 10 months but many expect the rise in fuel prices to have a major impact in the month of September.

Industrial production is steady in July with a growth of 6.6 percent but it's largely due to a low base. In July last year, the IIP was at a mere 0.9 percent.

CNBC-TV18 caught up with Chengal Reddy, chief adviser at CIFA; Surjit Bhalla member of PMEAC; Pronab Sen, former principal adviser of Planning Commission and DK Joshi, chief economist at Crisil, to discuss the state of the Indian economy and what we can expect from Prime Minister Modi's review meeting.

Bhalla said, "Let me first point out that whatever I say it's my own personal view and not that of the PMEAC. The first point on the rupee is that it's part of a global sell-off of currencies. Neither developed country currencies nor developing countries currencies have been spared in this global dollar strength. So, I think that needs to be and should put some perspective on what is happening."

"The second part is that if you look at the annual report of the RBI, they state that they don’t think or let me quote it more accurately ‘that amongst the peer group the Indian rupee appeared to be less overvalued than many of its peers’. So, if there is a fundamental reason for the rupee to be where it is, that is an overvaluation, it doesn’t appear from anything that the RBI has said through its research notes or through its annual report or anything that the ministry of finance has said that they believe that the rupee is at 71-72-73 levels somewhat over what they believe to be fair value," Bhalla added.

Sen said, "By and large, I agree with what Surjit Bhalla said, there is no reason to panic. But the fact is that media has created panic. The fact is that the political system is making a massive issue out of it. So, the government has to be seen to be doing something and I think what the department of economic affairs secretary was doing was essentially what the governor RBI should have been doing, which is talking the market up and you don’t do anything, but you make the right kind of noises now that is how it should be. But I think the government will have to go beyond that, because it has to address the political issue and hopefully what they will be doing are taking steps to which will give a certain degree of confidence and bring some rationality back to the market."

Joshi said, "As far as the NSE is concerned, if you look at the prices today, almost the bulk of the crops are below the new MSP that has been announced. So in a way, we have a situation of glut and you are trying to push the prices up and a little difficult. But that is the commitment that government has made, they have raised the MSP taking the first step. The second step is ensuring that effective procurement takes place on that side. Now that does push food inflation a little bit. Right now, the inflation is down today largely because of the food. I mean the high fuel prices, the currency weakness and they are yet to translate into generalise inflation and core inflation also has started coming down. So, if you raise MSP effectively then it will definitely have an impact on food inflation. It may not take overall inflation beyond the central banks projection but it definitely from these levels it will go up."

"The past four years during Modi government there was no problem in regard to production. By and large, production has been satisfactory and food inflation was also at a very low level. But what Modi government has to understand is that as one of our colleague was telling most of the prices are less than MSP, almost every price, every commodity specially in regard to groundnut, cotton, pulses. You see most of these products, there is no procurement system. Even though recently they did announce this increase in rice and wheat, except for Punjab, Andhra Pradesh, Chhattisgarh and Jharkhand. For rest of the states, there is no procurement in place," Reddy said.

First Published:Sept 12, 2018 11:31 PM IST