Hanoi: Further rises in oil prices could clip around 1 percentage point off the Indian government’s growth forecast of 8.75 to 9.25% for the current fiscal year, finance minister Pranab Mukherjee said on Thursday.
He said inflation was projected at 7.5 to 8%, and authorities were taking steps to manage both demand and supply issues to bring it down further.
The Reserve Bank of India raised interest rates by 50 basis points on Tuesday, a bigger rise than the market had expected and the ninth increase since March 2010. Mukherjee said the central bank’s tightening had mopped up excess liquidity but had not damaged growth prospects.
“Despite these efforts, if the oil prices continue to exert pressure at the existing level, it will be difficult for us to manage both inflation and achieve high GDP growth merely through domestic policies,” he said at a media conference in Hanoi during the Asian Development Bank’s annual meeting .“Therefore there may be a possibility of our GDP growth may come down to around 8%.”
On Wednesday, Mukherjee had said fighting inflation could lower growth to around 8.5%.
Oil prices rose to 32-month peaks last month due to tensions in the Middle East and North Africa but a stronger dollar and concerns about policy tightening in China and India have seen prices come down this week.