Economy strong, govt will take care of rising crude prices: FM

Posted By: Pti
Subscribe to Oneindia News

New Delhi, Feb 2 (PTI) Asserting that economicfundamentals are strong, Finance Minister Pranab Mukherjeetoday said the government will "take care" of the impact ofrising global crude oil prices, which are hovering around two-year high due to crisis in Egypt and other Arab countries.

Attributing the recent slide in stock market to continuedselling by foreign institutional investors, he said that theeconomy during 2010-11 would record a growth of 8.5 per cent,up from 8 per cent a year ago.

Mukherjee''s remarks come at a time when crude oil priceshave soared a 28-month high of USD 102 a barrel followingdeepening of political crisis in Egypt and fears of theproblem striking Yemen.

"Unfortunately, developments in the Middle East and itsimpact on the Arab world is causing uncertainty about (oil)production (and) about (its) availability. We are watching thesituation (closely)," he said, adding the government will"take care" of the impact of high prices on the domesticindustry.

Unrest in Egypt fueled Brent crude price to an intra-dayhigh of USD 102.08 per barrel yesterday, its highest levelsince late September 2008 after the Lehman Brothers bankruptcysent financial markets into a tailspin.

Pointing that India had managed the situation when crudeoil price had touched a record high of USD 147 per barrel inJuly 2008, Mukherjee said his ministry was in constant touchwith the Oil Ministry on the unfolding situation.

The spike in global rates has meant that the gap betweendomestic retail fuel price and their cost of production haswidened, necessitating action -- either by way of priceincrease or hike in government subsidy.

Raising prices of auto fuel, however, may not be an easyoption at a time when the government is struggling to calmdown inflation which rose to 8.43 per cent in December, 2010,from 7.48 a month ago.

Giving higher subsidy to the oil marketing companies, onthe other hand, would amount to sacrificing fiscal prudence.

Noting that "the stock market has its own mind and ittake cues from developments all around," Mukherjee said thevolatility in the capital markets was on account of "continuedselling by FIIs".

The benchmark index Sensex of the Bombay Stock Exchangehad lost 5.90 per cent in the past five trading sessions withinvestors resorting to hectic selling in wake of Egypt crisisand high inflation etc.

The markets, however, recovered today gaining 68 pointsto close at 18,090.62 points.

Please Wait while comments are loading...