Prime Minister Narendra Modi is set to hold an economic review meeting with key policymakers on Saturday to discuss possible interventions by the government to address the macroeconomic challenges arising out of the depreciating rupee and steep rise in fuel prices.
The high-level meeting has been called to analyse the economic situation precipitated by record depreciation in rupee and unprecedented rise in fuel prices.
"We have to hold our nerves," said a finance ministry official. So what should the government do on Saturday? Should they unveil measures to stem the fall in rupee and rein in the fuel prices? CNBC-TV18 conducted a poll among top market participants and here is what they are expecting.
A majority of 80 percent believe that there is no need for the government to act at the moment. Only 20 percent of respondents feel the need for any action.
In fact, a similar majority of 80 percent are not even expecting any major announcements after Saturday's meeting.
CNBC-TV18 caught up with TCA Anant, former chief statistician, Upasna Bhardwaj, senior economist at Kotak Mahindra Bank and Samiran Chakraborty, chief economist at Citi to discuss the state of the Indian economy and what we should expect from PM's economic review meeting.
"I am not aware of what the context of the meeting is, but government regularly hold meetings of its senior economic policymakers to basically take stock of the situation," said Anant.
As far as the rupee is concerned, we are reading far too much into its depreciation vis-à-vis the US dollar, he said.
"If you look at all the composite indicators looking in terms of what the real exchange rate is and what is happening to rupee against other competing currencies and trade-weighted exchange rates, I don't think we have such a ground to worry, added Anant.
"We have to look at it with a slightly broader context," said Chakraborty. "It is important now to identify what is the root cause of the problem."
If the problem is a structural trade deficit issue then the government make a framework to address the issues, he said.
The framework that the government is thinking at this moment itself will be a big guidance for the market, Chakraborty said, adding that for now the only signal that has come through the announcement of this meeting is that the level of exchange rate is not comfortable from the government's standpoint which in itself is a signal for the market.
"If we look at the foreign portfolio investment (FPI) flows, we really haven't seen much of an outflow since the month of July," said Bhardwaj, adding that it has stabilised briefly in September we will again see the resumption of the outflows.
Right now since February till now the rupee has depreciated around 12-13 percent after a significant period of stability so clearly, somewhere we need to realise that the speculative positions are not as dominant right now, she said.
"Any intermittent rate hike or an aggressive rate hike is really not warranted because we do not achieve much with that," Bhardwaj added.
The government have to keep this in mind that rest of the other emerging markets are also hiking rates and at this point, we need to take into account what is the impact of the rupee depreciation on the inflation trajectory going forward, she said.
"If that is really providing upside risk then that is where we can expect the Reserve Bank of India (RBI) to act and hence we are expecting a rate hike in October," Bhardwaj said. "But I don not see a reason for an immediate policy rate hike or even an aggressive rate hike."