Warning that oil price pressures will pull down economic growth prospects and fuel inflation, Finance Minister P Chidambaram on Friday pegged India's GDP growth to be lower than the earlier projection of over 7 per cent this fiscal.
"Our growth rate ought to have touched and perhaps exceeded 7 per cent. But I am afraid if oil prices rule at this level we would have to be content with growth between 6-7 per cent," Chidambaram said in an interview to BBC in London.
Although 6-7 per cent growth was regarded as high growth when compared to most other countries, he said it was not 'good enough' for India.
"A $5 a barrel increase in oil prices will retard GDP growth by 0.5 per cent. More than that it will also contribute to inflation by about 1.4 per cent," he said.
"That's why I blame oil prices and I very severely criticise what oil producing countries and some speculators are doing by raising prices to these unjustified levels," he said expressing concern over the rise in international oil prices to over $50 a barrel.
On the comparative impact of oil price rise on India and China, Chidambaram said: "Oil price hike will hurt both China and India. Oil prices will retard growth in every country of the world. That's no consolation."
On whether it poses difficulties for the government politically when it is under pressure from the Left parties on protecting the interests of support, Chidambaram said "I think everyone in India and that includes the Left wing knows that oil prices are beyond our control."
"We don't determine oil prices. Our dependency on imported crude is about 70 per cent of our requirement. Therefore, the very poor, even the unlettered know that this is something beyond the control of the government. That's why they are tolerant," he added.
On the Left parties' opposition to hike in FDI, he said: "Left is not philosophically opposed to foreign direct investment."
In fact, he said: "West Bengal, which is ruled by the Left, asked me to pose several projects to the World Bank, to DFID in the United Kingdom and to help them attract foreign investment."
"What they say is, best as I have understood, please convince us that the FDI that you are looking for helps this sector technologically or in terms of new management skills or in terms of new products or in terms of new markets. The Left is not opposed to FDI in power, in petroleum, in ports, in airports," he said.
On whether the feel-good factor in the talks with Pakistan would translate into a boost in business between the two countries, Chidambaram said: "India is now forging bilateral agreements with Nepal, with Bhutan, with Sri Lanka and we can easily forge one with Bangladesh."
"The one that will be left out among the South Asian countries will be Pakistan. So it is in Pakistan's interest to move forward and treat India like it treats any other country in the world with which it wants to trade, with which it should trade for its own advantage," he added.
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