Unjustified surge in Crude price has hurt Indian GDP, says FM

Soaring global crude oil prices, which are totally based on ‘speculations’, have trimmed off the country's economic growth rate by 1 percent, the Indian Finance Minister P Chidambaram said at the India Economic Summit on Sunday.

Addressing the Summit, which began yesterday in Delhi and was organized by the World Economic Forum (WEF) and the Confederation of Indian Industry (CII), the Indian Finance Minister said the country’s growth rate could have been much better but was being deprived of achieving higher gross domestic product (GDP) growth figures because of unjustified rise in prices of petroleum products.

To clarify his point that the rise was not on the basis of demand and supply factors but was only due to speculation, Finance Minister drew attention to how the crude oil prices recently nose-dived from a high of $78 per barrel to $55 per barrel when there was no change in demand and there was little change in supply.

“It was speculation-driven pricing. If it had been due to the demand-supply scenario, prices then could not have come down automatically,” Chidambaram said at the Summit. "If the oil prices would not have surged to $75 per barrel, India would have achieved 9-9.5% growth," he added.

To find out a solution of the concerns related to the "speculative" movement in prices, Finance Minister urged both oil producing and oil-consuming countries to set up a mechanism to ensure that prices could be kept within a band.

As a solution, he suggested that countries producing oil must ensure that prices do not cross a certain level, while oil-consuming countries must ensure they do not let prices fall below a particular level.

Chidambaram blamed the oil producing companies for exploiting those consuming oil. "The world must come to terms with the fact that oil producing countries are trying to exploit oil consuming countries," FM said.

He said that increasingly growing developing countries such as India and China should not be asked by the developed countries to shorten their energy consumption, instead, as a fair way out, the developed countries should give the required technologies to the counter countries to deal with this issue.

"India and China are growing at 8-9%, which gives a great opportunity to oil producing countries to exploit us. Others and I have offered to sit across a table and discuss that oil prices will not go below a level," Chidambaram said.

Along with global crude prices concerns, water crisis, HIV climate change, demography, globalization and protectionism were also enlisted in “India in a world of risk”.