The highest body in the ruling party has viewed with concern the "fluctuations in the capital market and the continuing fall in the external value of the rupee." It also urged the government to start an effective dialogue with industry to stabilise market sentiments.

In a resolution on the "state of the economy and government's initiatives," which was adopted by the national executive on the second day of its three-day meeting here, the party called for steps to shore up the rupee.

The resolution was moved by party general secretary KN Govindacharya.It wanted the government to take suitable steps with regard to imposition of countervailing duty by some countries on certain local goods and welcomed its measures to attract foreign investment.

Party sources said the BJP-led coalition came infor sharp criticism by some members for its failure to ease the price rise which, they felt, was eroding the party's vote banks.

The party suggested streamlining and strengthening the public distribution system (PDS) and use of organisations like Nafed to hold the price line and ensure distribution of essential commodities at reasonable rates so that the common man is relieved of the burden of back-breaking prices and shortages created by hoarders.

The party urged the government to ensure that commercial banks implement the finance minister Yashwant Sinha's announcement that defaulting farmers will not be arrested and recommended setting up of rural loan recovery tribunals at the district level.

Sinha said the government had taken several initiatives to provide long-term and lasting correctives to the various maladies that had afflicted the economy for decades. Sinha said the rise in prices was owing to the faulty policies adopted by previous governments all these years.

The national executiveappreciated the steps taken by the Vajpayee government to improve the country's economy. It said the latest data on the industrial performance was very encouraging as the manufacturing sector's performance had improved by 5.4 per cent in the first quarter, against 3.3 per cent in the corresponding period last year.

The capital goods sector, languishing till now owing to liberal imports, had also shown an 11 per cent growth in April-June this year. The finance minister informed the national executive that the government had decided to import 1.5 lakh tonnes of edible oils in the days to come to meet the situation. The problem had compounded owing to the failure of traders to import edible oils from south-east Asian countries.

Sinha said the government had started the process of undoing the wrongs and correcting the mistakes of the past. "This is the legacy of 50 years of mismanagement of the economy, pursuit of wrong policies and adoption of unbalanced development models by the previous government," saidthe resolution.

The budget had shifted the focus of the development strategy by investing more in agriculture and rural development.

The resolution was, however, silent on economic reforms that the government wished to introduce in the near future. It only mentioned that over the years, especially since 1991, when economic liberalisation gathered momentum, public investment in the social sector had registered a steep decline. It welcomed steps taken by the government to end generation of black money by both tightening the tax collection system and widening the tax base.