India faces a difficult economic situation: PM

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.

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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.

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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.