Finance Minister Pranab Mukherjee on Wednesday asserted that India's economic fundamentals were strong enough to end the current fiscal year with a growth of 8.5 per cent and the government would ‘take care' of the impact of rising global crude oil prices to ensure that it did not affect the domestic industry. The Finance Minister's expression of confidence has come at a time when the country's economy is faced with a double whammy of negative sentiment in the stock market owing to heavy selling by foreign institutional investors (FIIs) even as crude oil prices have soared to a 28-month high at $102 a barrel in the wake of the political crisis in Egypt and the uncertainties in Yemen.
At a hurriedly convened press briefing at North Block here, Mr. Mukherjee sought to attribute the volatility and recent slump in the bourses to “continued selling by FIIs” and point out that it bore no reflection on the country's economic situation. “While the stock market has its own mind and it takes cues from developments all around, I want to take this opportunity to reiterate the strong fundamentals of the Indian economy,” he said.
On the spike in crude oil prices which is expected to exert further inflationary pressures and have a cascading impact on the economy, Mr. Mukherjee said: “Unfortunately, developments in the Middle East and its impact on the Arab world is causing uncertainty about [oil] production [and] about [its] availability. We are watching the situation [closely].” Alongside, he assured that the government would ‘take care' of the impact of high prices on the domestic industry.
In this regard, Mr. Mukherjee noted that in the past also, the government had managed to tackle the crisis situation when crude oil had touched a record high of $147 a barrel in July 2008. His Ministry, he said, was in constant touch the Petroleum Ministry and monitoring the situation.
At a time when inflation is at a high, the only way of cushioning the effect of high oil prices would be to tinker with the levies on various fuels, especially when the oil subsidy bill is already huge. Incidentally, the meeting of the Cabinet Committee on Prices is slated for Thursday.
The government, Mr. Mukherjee said, would stick to the 8.5 per cent growth projected for the current fiscal. “I am confident that we will meet our growth projection for the year… [2010-11] will end with a better than projected fiscal balance and more moderate inflation,” he said.
Mr. Mukherjee said the recent estimates by the Central Statistical Organisation suggested that “the stimulus led recovery in 2009-10 was stronger than earlier believed. More importantly, both savings and investment growth have shown strong recovery in 2009-10 over the preceding year.'' “This augurs well for sustaining high growth of the economy in the medium to long term,” he said.
