News: India confident of 8% growth, oil a risk
(RTR 05/05/2006) Hyderabad - India is confident of sustaining 8 percent growth for many years but the recent rise in global oil prices poses a major risk to Asia’s third-largest economy, a top government official said on Thursday.
The economy has expanded at an average of 8 percent in the past three years on strong demand and the central bank expects growth of 7.5-8.0 percent in the fiscal year ending March 2007.
But global oil prices, which have risen more than 20 percent in 2006, could derail growth momentum since the country imports 70 percent of the crude oil it consumes.
“As you know for the last three years, the average rate of growth has been around 8 percent. We are confident of sustaining this high level of growth for many years,” economic affairs secretary Ashok Jha told Reuters in an interview.
“Oil prices are going to be a major risk. I think the success of the economies will depend upon how they will meet this challenge and that is why there is so much concern.” The ruling coalition, under pressure from its communist allies, has not raised retail fuel prices in 2006 despite higher crude prices.
Jha said raising fuel prices will have to be a collective decision, echoing finance minister Palaniappan Chidambaram who said political consensus was key to raising the retail prices.
“Increase in prices of any product, particularly oil which impacts the entire economy, is a complex issue. It has to be a collective decision,” he said.
Higher inflation: Analysts fear higher retail fuel prices could stoke inflation and prompt the central bank to raise interest rates. The central bank left rates unchanged in its monetary policy in April, surprising markets.
Jha expected a smooth passage of the federal borrowing programme and said a fiscal deficit target of 3.8 percent for the year to March 2007 would be met.
India hopes to raise its tax-to-GDP ratio to 11.2 percent from 10.5 percent in 2005/06. It forecast tax revenues at 4 trillion rupees ($90 billion) in its budget in February, with gross government borrowing set at 1.53 trillion rupees, 10 percent higher than 2005/06.
The economy has expanded at an average of 8 percent in the past three years on strong demand and the central bank expects growth of 7.5-8.0 percent in the fiscal year ending March 2007.
But global oil prices, which have risen more than 20 percent in 2006, could derail growth momentum since the country imports 70 percent of the crude oil it consumes.
“As you know for the last three years, the average rate of growth has been around 8 percent. We are confident of sustaining this high level of growth for many years,” economic affairs secretary Ashok Jha told Reuters in an interview.
“Oil prices are going to be a major risk. I think the success of the economies will depend upon how they will meet this challenge and that is why there is so much concern.” The ruling coalition, under pressure from its communist allies, has not raised retail fuel prices in 2006 despite higher crude prices.
Jha said raising fuel prices will have to be a collective decision, echoing finance minister Palaniappan Chidambaram who said political consensus was key to raising the retail prices.
“Increase in prices of any product, particularly oil which impacts the entire economy, is a complex issue. It has to be a collective decision,” he said.
Higher inflation: Analysts fear higher retail fuel prices could stoke inflation and prompt the central bank to raise interest rates. The central bank left rates unchanged in its monetary policy in April, surprising markets.
Jha expected a smooth passage of the federal borrowing programme and said a fiscal deficit target of 3.8 percent for the year to March 2007 would be met.
India hopes to raise its tax-to-GDP ratio to 11.2 percent from 10.5 percent in 2005/06. It forecast tax revenues at 4 trillion rupees ($90 billion) in its budget in February, with gross government borrowing set at 1.53 trillion rupees, 10 percent higher than 2005/06.
posted by InCar Group Press Room at 14:37
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