Finance Minister Pranab Mukherjee on Friday flagged rising crude oil prices, food inflation and increasing flows of foreign institutional investments (FII) as areas of concern for the Indian economy even as it has bounced back on the growth bath.
The FM said the rapid recovery of the growth momentum is comforting, but we cannot afford to be complacent as there are several challenges that the Indian economy faces from its current domestic and external context.
"The global recovery remains fragile and the creeping increase in international crude oil and other commodity prices is a reality that we are already confronting. As a result, the oil marketing companies have had to hike the petroleum product prices earlier this month," he added.
The Indian basket of crude oil imports is hovering at close to $90 a barrel and this would entail a subsidy bill to the tune of Rs 70,000 crore on the sale of petroleum products, which the government and the oil companies will have to foot.
Mukherjee added by saying that there are domestic supply side pressures on food prices that we have been grappling with for the past several months. Addressing the annual general body meeting of the PHD chamber of commerce, the FM highlighted the fact that there has been a significant increase in FII inflows even as there has been some moderation in foreign direct investment (FDI) flows.
He said, "So far foreign capital flows are well within the absorptive capacity of our economy and exchange rate and monetary management has not been unduly challenged but this can change at short notice, we have to be alert and monitor the developments constantly.''
According to economists, FII inflows into the country's stock market represent "hot money'' that can flow out at short notice and create instability in the market. Excessive flows can also cause the exchange rate of the rupee to rise which
Courtesy: Mail Today
Special 
