The Reserve Bank of India (RBI) has allayed fears of spiraling global oil prices, saying they will “remain incipient”. However, the central bank said global and domestic food prices would remain firm.
The price of the Indian basket of crude oil increased by almost 76 per cent from $56.6 a barrel in February 2007 to $99.3 a barrel in March 2008. In rupee terms, the increase works out to almost 61 per cent.
The RBI said in its “Report on Macroeconomic and Monetary Developments in 2007-08”, released on Monday, a day ahead of the annual credit policy, that overall, manufactured products were the major driver of wholesale inflation till March 29, 2008 with a weighted contribution of 53.5 per cent (57.3 per cent a year ago), followed by food at 27.1 per cent (39.0 per cent) and fuel at 19.4 per cent (4.0 per cent).
Though asset price bubbles were the major concern that forced the RBI to effect a series of interest rate hikes over the last 13 months, these fears were dispelled when the equity market fell on the back of the US credit crisis and concerns about a slowdown in India.
Domestic gold prices mirrored movements in international prices during 2007-08 by rising about 36 per cent, year on year, to around Rs. 12,739 per 10 gm in March 2008. International gold prices increased by almost 48 per cent over the same period. International gold prices touched a peak of $1,011 per ounce on March 17, 2008, reflecting the weakening US dollar, hardening oil prices and increased investor interest following uncertainties surrounding the global financial markets, the RBI said.