Reserve Bank of India (RBI) governor D Subbarao on Monday said that spiralling oil prices could jeopardise recovery of the global economy, already vulnerable to risks including political and social turmoil in parts of the world combined with natural disasters.
“The global recovery may be jeopardised by a sustained rise in oil prices,” said Subbarao in his address to the international monetary and financial committee in Washington.
“Apart from inflationary pressures confronting emerging and developing countries, there is the danger of a slowdown in the global economy unless oil prices moderate from current levels,” he said.
While the trough of the crisis appears to be behind and there are signs that the recovery is consolidating, new challenges facing the global economy render it vulnerable, he said. “We have to remain vigilant and be prepared to deal with threats, old and new, as we repair and rebuild. The global problems we are facing today are complex and not amenable to easy solutions.”
World food prices have surged considerably due to concerns about low future supplies because of bad weather and low inventories, raising concerns about food security, the RBI governor said.
Countries should not use currency intervention as a part of trade policy, and should allow economic fundamentals to dictate exchange rates, he said. “Currency interventions should not be resorted to as an instrument of trade policy.”