The Hindu : Business : Energy prices, a drag on economy: Montek

Online edition of India's National Newspaper
Saturday, Dec 22, 2007
ePaper

Business

Business

Energy prices, a drag on economy: Montek

Special Correspondent

The U.S. sub-prime crisis will have an impact on India

Growth rate expected to be around 8.5-9 p.c.
Entering XI Plan with strong fundamentals

NEW DELHI: Planning Commission Deputy Chairman Montek Singh Ahluwalia has said the prevailing high level of global energy prices was already posing a serious constraint on the Indian economy and hoped that there would not be any further sharp rise in the days to come.

Speaking at CNBC-TV18’s India Economic Conclave here on Thursday, Dr. Ahluwalia said: “I don’t think that there will be a [further] sharp increase in energy prices. [The] present level of energy prices is [already] a serious constraint. You know what we have to do.”

Soaring crude prices

The remark was an apparent hint towards a hike in domestic fuel prices in the near future which in turn is expected to have a cascading effect on the prices of all commodities and thereby fuel inflation.

The prices of energy resources such as crude oil and coal have been soaring in the international market and in the absence of a commensurate increase in domestic prices, the loss burden of the public sector oil marketing companies has been rising each day.

Having crossed an unprecedented $99.29 a barrel mark last month, crude oil prices have been hovering above $85-90 in recent days.

As for the U.S. sub-prime mortgage crisis, Dr. Ahluwalia said it would have some impact on the Indian economy and in the event of a global slowdown, the overall growth rate could also slip a bit.

“The U.S. sub-prime crisis will have some impact because we benefit from the boom in the world economy and our economy will slow a little bit if there is a global slowdown.” However, he felt that the U.S. mortgage prices would not affect the country’s five-year growth prospects “if we put our things in place.”

Turning to the endorsement of the XI Plan by the National Development Council (NDC) on Wednesday, Dr. Ahluwalia expected the GDP (gross domestic product) growth to be around 8.5-9 per cent during the current fiscal and was confident that a 10 per cent growth in the terminal year (2011-12) of the Plan period was “doable.”

“There is a general recognition among Chief Ministers that we are entering the current Plan on strong fundamentals. We believe that the growth rate in the current fiscal would be between 8.5 per cent and 9 per cent,” he said.

Poverty reduction

Pointing out that speedier economic growth would depend a lot on issues such as faster reduction of poverty and employment generation, he said “the task that we have set for ourselves is quite ambitious. We have to ensure that we get the desired growth.” Likewise, for speedy development of world-class infrastructure, he said the country would require $500 billion within the next five years.

The Plan document approved by the NDC, he said, laid a lot of emphasis on more focussed attention to the social sectors. For this, the government had announced various programmes, he said.

Printer friendly page
Send this article to Friends by E-Mail

Business

News Update

Stories in this Section