Date:09/10/2007 URL: http://www.thehindu.com/2007/10/09/stories/2007100957691800.htm

Business

India vulnerable to volatility in crude prices: Reddy

MUMBAI: Reserve Bank of India Governor Y. V. Reddy on Monday said the country was ‘vulnerable’ to shocks arising out of volatility in global oil prices.

But, he said, setting up of a stabilisation fund was not justified under the given situation. “There is no serious consideration of setting up a stabilisation or sovereign wealth fund,” Dr. Reddy said, while addressing the Foreign Exchange Dealers Association of India (FEDAI) here.

India imports 73 per cent of oil to meet its fuel needs and faces inflationary pressure on any sharp increase in global crude prices.

Crude oil touched a record level of $83 a barrel on September 20.

In India, the inflation rate rose to 3.42 per cent for the week ended September 22, compared to 3.23 per cent in the previous week.

The stabilisation fund comprises windfalls generated through commodity exports like edible oil, while the sovereign wealth fund could be carved out from a part of forex reserves to invest in high-yielding assets.

“If and when we decide to set up these funds we have to put in place measures of governance, transparency and accountability, which would provide the necessary comfort,” the RBI Governor said. — PTI