Finance minister Pranab Mukherjee said on Tuesday that India’s economy faced an unusual challenge this year in the political unrest sweeping Middle East and North Africa, which has sent crude prices scurrying up.
“High volatility in oil prices will have to be taken into account,” Mukherjee told business leaders in a post-budget session, adding that the contingency measures arising out of the unrest is yet to be factored in.
He also warned earlier at a session with FICCI gainst complacency and said growth prospects cannot be taken for granted in the wake of a fragile global recovery.
Benchmark crude price surged to $120 a barrel in the wake of turmoil in Libya. It is now around $112.
High oil prices can hit industrial costs and squeeze demand, thus hurting growth, and also fan inflation, currently a big concern for the government.
The minister said the government six key legislations apart from goods and services tax and direct taxes code, which include pension, insurance and banking, will be critical for reforms.
“The challenge before the government and the Reserve Bank of India has been to support the growth process without compromising on price stability,” he earlier said at FICCI.
Mukherjee underlined the need to revive private investment, fiscal consolidation and supply-side responses from the farm sector to improve the availability of food with a view to ensuring growth and maintaining price stability.