Rise in oil prices may pull down GDP growth to 8 pc: Pranab

Chandra Shekhar
Hanoi, May 5 (PTI) Any further rise in crude oil
prices may dent India's economic growth to 8 per cent in
2011-12 from a projected nine per cent, Indian Finance
Minister Pranab Mukherjee said here Thursday.
"If oil prices continue to rise, it would be difficult
to achieve higher GDP. GDP may come down to 8 per cent from
(the projected) 9 per cent," Mukherjee told reporters on the
sidelines of ADB annual meeting.
Rising global commodity prices, especially of crude
oil have fuelled inflationary pressure in India, forcing the
Reserve Bank to tighten monetary policy and compress demand at
the cost of economic growth.
The Indian economy grew by 8.6 per cent last fiscal
and is projected to expand by 9 per cent in 2011-12.
However, with near nine per cent inflation, the growth
target has been scaled down to 8 per cent.
In the backdrop of consistent rise in crude oil prices
to over USD 110 a barrel, the Indian government is mulling
revision of retail prices of diesel and petrol.
In the short term it may exert more pressure on
inflation, which remains primary concern for the government.
"Our projection is 7.5-8 per cent inflation during the
year," Mukherjee said.
Earlier this week, the Reserve Bank of India too had
lowered economic growth projection to 8 per cent due to
measures taken to tackle high inflation especially food
prices.
India's economy is estimated to have clocked 8.6 per
cent growth in 2010-11.
Asked whether the government is planning to increase
diesel prices in the near future, Mukherjee said, "We will
announce it as and when the decision is taken."
In its annual monetary policy, the RBI had advocated
hike in prices of petroleum products for sustaining the
economic growth in the medium term.
The government has not allowed state oil firms to
revise diesel prices since June last year when crude oil was
ruling at USD 72-73 per barrel.