The Manmohan Singh government, which was so far gripped by policy paralysis on the economic front, is slowly stirring into some action as foreign investors have started to panic about the current account deficit and the falling rupee

The United Progressive Alliance (UPA) government, finally seems to have woken up to the reality of the worsening economic situation, made worse due to the falling rupee, rising current account deficit (CAD) and concerns over withdrawal of funds by foreign institutional investors (FIIs). While the Cabinet Committee on Economic Affairs (CCEA) came up with several measures, finance minister P Chidambaram tried to calm the nerves over the domestic currency that touched a lifetime low on Thursday.

The CCEA on Friday approved the proposal to replace highway developers, for both on-going and completed projects. This was a long-pending proposal from developers as well the National Highways Authority of India (NHAI) for allowing exit for cash-strapped developers. The developer can now be replaced by other with deeper pockets.

During FY2011-12, the NHAI and the ministry of highways awarded projects of 8,000km. However, the next year, the same figure came down sharply to 787km, a level last seen during the 2008-09 global slowdown. Even after repeated bids, many projects failed to get any response from developers.

In addition, large number of projects awarded during FY12 are yet to achieve financial closure. Developers are facing severe shortage of equity and consequently, as they are unable to raise required debt, there was poor response to public-private partnership (PPP) projects. To revitalise the sector, there is an imperative need for industry to raise fresh equity. Innovative ways of infusing equity was the need of the hour without compromising on due diligence and safeguarding public interest.

The decision to allow cash-strapped developers to exit from the project would allow entry of a financially healthier one instead of declaring the project a non-performing asset (NPA).

Speaking with reporters, finance minister P Chidambaram said, “We hope, with this, a number of stalled (road) projects, can now move forward.”

The CCEA also approved the proposal for the continuing the Restructured Accelerated Power Development and Reforms Programme (R-APDRP) in the XII Plan with minor changes to complete the ongoing or in pipeline projects in order to meet the objective and scope of the XI Plan R-APDRP. The programme size is Rs51,577 crore. Initially, the government and financial institutions would provide Rs50,000 crore. Out of the government’s grant of Rs31,577 crore, it has already released Rs5,697 crore, while Rs10,830 crore would be released during the 12^th Plan.

The Cabinet Committee also cleared the proposal from the food ministry to offload 10 million tonnes (mt) of wheat and 0.5mt of rice from the godowns of Food Corporation of India (FCI). These foodgrain would be sold in the open market to control spiralling retail prices of wheat and rice. FCI has a stock of 77 mt of foodgrain against its storage capacity of around 74 mt.

The CCEA, which earlier this month had deferred a decision, on Friday cleared 5% stake sale in Neyveli Lignite (NLC), out of its holding of 93.56% through an offer for sale. This would help the government to garner about Rs466 crore, based on today's trading price of Rs59.8 per share of the company. The stake sale has become necessary following the August 2013 deadline given by market regulator Securities and Exchange Board of India (SEBI) to have a minimum 10% public shareholding in all public sector units (PSUs).

According to the Reserve Bank of India (RBI), the country’s macro-economic conditions remain weak. Growth concerns continue, due to a “soft patch” in the global economy and the continued slowdown in the domestic manufacturing sector. The recent drop in inflation is largely along the RBI’s expected lines and it expects the inflation outlook to be determined by minimum support prices, monsoon progress and rupee depreciation. On the external front, the RBI expects softer commodity prices and lower gold imports to moderate the current account deficit in FY14 (year ending March 2014), but financing the deficit remains a near-term challenge.