'Euro problem, high oil prices behind rupee fall'
Grappling with a sharp drop in rupee value and downgrade in sovereign rating outlook, India today blamed structural problems in Eurozone and volatile commodity prices for balance of payment (BoP) stress in many Asian countries.business Updated: May 04, 2012 20:46 IST
Grappling with a sharp drop in rupee value and downgrade in sovereign rating outlook, India on Friday blamed structural problems in Eurozone and volatile commodity prices for balance of payment (BoP) stress in many Asian countries.
"In several Asian countries, excepting China, the BoP is under stress which leads to currency depreciation," Finance Minister Pranab Mukherjee, who is attending annual meeting of the ADB Board of Governors, told reporters here.
He said certain fundamentals of the Indian economy have to be corrected against the backdrop of the rating agency Standard and Poor's downgrading outlook for the country's sovereign rating.
He, however, did not elaborate what action the government was mulling.
At the business session of the board of governors, he said, "underlying structural problems in Eurozone, high and volatile commodity prices prices, particularly of fuel oil and threats to disruptions in supply chains has undermined business confidence".
The main areas of concern for Mukherjee were Eurozone and Japan, as they provide big markets to the merchandise from the developing world.
"Unless recovery in Japan and Europe is fast-tracked...it will have its impact. Eurozone crisis is expected to cast its shadow...," he said.
The Indian currency has suffered sharp losses by over 15 % in the last few months, leaving a bruising impact on the it's imports, which mainly comprise crude oil. The rupee today fell close to 54 against the US dollar and before closing at 53.47/48.
Mukherjee, who will assume tomorrow chairmanship of the ADB Board of Governors for a year, said the Asian region is still doing better than the developed countries.
Mukherjee said: "We will review the world economy...the (Asian) region is one of the important contributors to the world economy."
India will be hosting the next ADB annual meeting.
According to ADB Bank President Haruhiko Kuroda, Asia's economy this year is set to grow by 6.9 %, and 7.3 % next year. It is the internal demand within the region that is driving the Asian growth.
The rupee depreciation has resulted in the higher landed cost of the crude oil by the state-owned oil marketing companies, which have not been able to pass on the price increase to the consumers.
With prospects of subsidy bill shooting the budgeted target of Rs. 1.8 lakh crore, Standard and Poor's has downgraded the country's sovereign rating outlook.
The Reserve Bank too has expressed concern over the worsening current account deficit, which is likely to be 3.5 to 4 % of the GDP for 2011-12.
Mukherjee further said the global issues which have a bearing on the Asian economies would be discussed at the meeting.
Although the meeting began on May 2, Philippines President Benigno Aquino III formally inaugurated the plenary marked by an impressive ballets by the local artists.