India warns rising oil prices could hit global recovery

April 18, 2011 - 0:0

India Saturday warned that the global recovery from the worst financial crisis in decades may be jeopardized by a sustained rise in oil prices and speculative movements in commodity derivative markets.

“The global recovery may be jeopardized by a sustained rise in oil prices,” Reserve Bank of India Governor Duvvuri Subbarao said participating in the International Monetary Fund (IMF) and World Bank spring meetings here.
“Speculative movements in commodity derivative markets are also causing volatility in prices,” he said.
Special Drawing Rights or SDRs cannot be a reserve currency in the international payment system as it does not meet the necessary conditions to play this role, Subbarao said.
“The SDR has to be accepted as a liability at the IMF , has to be automatically acceptable as a medium of payment in cross-border transactions, be freely tradable and its price has to be determined by forces of demand and supply,” he said.
“As the SDR does not satisfy these conditions, it cannot be a reserve currency in the international payment system.”
“Going by the recent initiatives, if at all there is a move to alter the composition of the SDR basket, we could consider including currencies of those dynamically emerging market economies that satisfy the existing inclusion criteria,” Subbarao said.
In particular, these currencies should be fully convertible on capital account with a market determined exchange rate, he said.
Earlier, speaking on the Global Economy and Framework at the G-20 Ministerial Meeting, he said the success of the G-20 collective effort towards this end is critical for a durable global economic recovery and for better global economic and financial governance.
“An effective outcome is needed to provide a signal that the G-20 is not only serious in ensuring strong, sustainable and balanced growth for the world economy going forward, but that it is, and it intends to remain, an effective and relevant institution for addressing current structural problems in a fast evolving global economy,” Subbarao said.