The Hindu : Business : High oil prices a risk to global economic growth

Online edition of India's National Newspaper
Saturday, May 06, 2006

Business

Business

High oil prices a risk to global economic growth

Ashok Dasgupta

Asia-Pacific nations clock 7.4 p.c. growth last year

HYDERABAD: Taking the cue from Prime Minister Manmohan Singh, Finance Minister P. Chidambaram maintained that even as the Asia-Pacific nations had posted a growth of 7.4 per cent last year, there was a significant risk to both global and regional economic expansions in view of the surging oil prices in the international markets.

Speaking immediately after Dr. Singh's opening address, Mr. Chidambaram, as Chairman of the ADB Governors' meeting, pointed out that with soaring oil prices threatening to surge further and wider disparity in global payment imbalances being a possibility, the risk of an economic crisis in the region could not be completely ruled out.

Need for sound policies

Prescribing a counter to tackle this situation, Mr. Chidambaram said: "Asian economies will need to be watchful and policy-makers must continue to pursue sound macro-economic policies and structural reforms to sustain growth and weather economic shocks.''

The Finance Minister, during his address, also called for larger investments in infrastructure and noted that without such an increase in spending, the region would fall short of the millennium development goals (MDGs) set by the United Nations for health, water supply, sanitation, primary education and environment sectors, in particular. The Government of Asian countries, he said, would be unable to meet the huge investment needs of the region single-handedly. This, he said, justified the need for aid from the multilateral funding agencies.

PTI reports:

Mr. Chidambaram said the recent hike in interest rates by banks would moderate advances to capital markets, real estate, retail and housing sectors but will not affect availability of credit to productive sectors.

"To the extent that risk weights have been increased (by RBI) for these four sectors and interest rates have moved up, I expect that lending to these four sectors will moderate."

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