Despite oil price rise, 9 percent growth possible: Montek

June 24th, 2008 - 5:09 pm ICT by IANS  

A file-photo of P. Chidambaram

New Delhi, June 24 (IANS) India’s key economist Montek Singh Ahluwalia Tuesday said a 9 percent growth rate was possible despite soaring prices of crude oil in the international market. Ahluwalia, also the deputy chairman of Planning Commission, said inflation was a major concern, but saw no reason to believe India cannot log a 9 percent growth rate in the current fiscal.

“The momentum of 9 percent growth can be maintained with the current prices of oil.” The price of crude oil is currently hovering around $140 per barrel.

India’s annual inflation rate hit a 13-year high at 11.05 percent for the week ended June 7 against 8.75 percent for the week before.

“With some added efforts, India can maintain the growth rate of 9 percent,” Ahluwalia told reporters after a meeting with a high-level delegation headed by Pakistan’s planning commission deputy chairman Salman Faruqui.

Though Ahluwalia did not specify these “added efforts”, he said a 9 percent growth rate in the medium-term was possible with the current level of oil prices.

Finance Minister P. Chidambaram Saturday had explicitly stated that the government would take more measures to rein in inflation. India’s central bank - the Reserve Bank of India - is expected to take steps to further tighten money supply.

India’s gross domestic product (GDP) clocked 9 percent growth in 2007-08, and Chidambram has repeatedly maintained that the country’s economy will grow at 8 to 8.5 percent in the current fiscal.

Ahluwalia, however, said achieving more than 9 percent growth of the economy was a difficult proposition in the backdrop of rising inflation and a volatile global oil market.

“We need to minimise our dependence on oil and should look for alternate modes of energy, something that becomes very important in dealing with the problem of rising fuel prices,” said Ahluwalia.

Replying to a question on the possible impact of soaring inflation on the growth of India’s economy, Ahluwalia said it depends on how the government of the day handled the situation.

“A lot depends upon how we handle the situation arising out of oil price rise. We at the (Planning) Commission feel that this could be done without hurting the confidence of investors,” he said.

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