A combination of skyrocketing oil prices, accelerating food inflation, and highly depressed stock and financial markets seems to have created the perfect economic storm that has rocked the world, seriously threatening growth. And even as the leaders of the world's major nations meet in Japan for the G8 Summit, these issues will significantly impact their discussions.

India too is experiencing a deceleration in economic growth due to high inflation and expensive fuel. And this is an issue that has Prime Minister Manmohan Singh worried too.

Speaking to journalists on board Air India One on Monday while on his way to Japan for the G8 Summit, Dr Singh said that there is a need to create a forum of oil producers and oil consumers, where they can sit together and work out modalities to introduce greater element of stability in global fuel prices.

He said that no one is quite sure what is causing the unprecedented flare-up in the global prices of oil. He said that the international financial institutions had not performed their duty well on this issue. Dr Singh said that some people believe that the oil price muddle is a direct result of supply and demand imbalance, while others say it is because of speculation as large sums of money have been put into the futures market.

He called upon the international financial institutions to pool their wisdom, knowledge, and experience to educate the world as to what is the principal cause for spiraling oil tags. He said that such a situation creates instability and volatility, and neither situation is in the interest of producers or consumers.

Balance tilts towards Asia

Dr Singh said that there was a need to re-look at the balance of power in the international financial systems. He said that this has been necessitated by the fact that bulks of the world's savings originate in Asia today and western institutions act only as intermediaries. This is a new power that the countries of Asia have acquired collectively, he said, and need to be given their due.

The prime minister said: "The world system is not a morality play; it is a power game. Those who have power do not want to share it with others. So it is a struggle. And we use all the fora to say that an increasingly interdependent globalised world requires more effective instruments of cooperation. That's why we have been pressing for reform in the United Nations, reform in the international financial institutions and, by the same logic, in other fora where world problems are discussed.

"I regret to note that the international community has been far less active in dealing with the problem of the oil crisis than was the case in the first crisis of 1973 or the second crisis of 1979. At that time, international institutions came up with new facilities to help countries affected adversely. But this time I think there has been lethargy. Our effort would be to nudge the international community and institutions to do more to deal with the consequences of the oil prices," he added.

Food inflation

Speaking on food inflation, the prime minister expressed satisfaction at the fact that India was well placed to solve this problem with its foodgrain output reaching a record level of 227 million ton, and procurement of wheat 22 million ton and rice 26 million ton -- an all-time high.

"So India is well equipped, but the global events, particularly the world energy crisis does affect the cost of production of fertilizers. Fertilizer prices are very sensitive to what happens to the global energy prices.  In the same way, when diesel prices go up, the cost of cultivation goes up," the prime minister said.

"The global food crisis has got closely interlinked with the global energy crisis through the bio-diesel- biofuels route.  A large part of agricultural crops are now being devoted to the production of biofuels and therefore it puts pressure on world food supplies.  It affects the prices of food. The world therefore should look at this new disequilibrium, which threatens to create a situation that countries may solve the energy problem, but there will be increasing poverty and hunger," Dr Singh said.