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India concerned about oil price volatility, says Pranab

business Updated: Apr 22, 2012 19:49 IST
finance minister


India is concerned about the volatility in the prices of oil, gas and other commodities as they were not aligned to economic fundamentals, finance minister Pranab Mukherjee said on Sunday.

"As a major commodity importer, India is very concerned about the increase and the volatility of commodity prices, especially oil, in recent times that seem to be not aligned with underlying economic fundamentals," he said at a meeting of the Group of 20 (G20) finance ministers and central bank governors in Washington.

"These distortions are, inter alia, adding to inflationary pressures in a number of developing countries, including India," he said.

Mukherjee said the reasons for the volatility in commodity markets were unclear as trends showed that the prices were not linked to economic fundamentals.

"Despite several studies, including one done by the G20, it is still not very clear as to what is driving this heightened volatility, which seems to be a mix of financialisation of commodity markets, monetary policy actions, political uncertainties, and demand-supply imbalances," he said.

Prices of oil, gas and other commodities have remained high despite a global economic slowdown. This is contrary to the 2008 global financial crisis that also led to a crash in the commodity prices.

Mukherjee emphasised on the need to bring transparency to the commodity market.

"Improving information and transparency in commodity markets, including futures and over-the-counter markets, will help alleviate the problem," he said.