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Expressing concern over rising global food and commodity prices, Finance Minister P. Chidambaram on Saturday sought urgent steps at the international level to curtail the diversion of foodgrains for alternative uses.
He also called for curbing the role of speculators in the futures market, saying that concerted action needs to be taken against “excessive financialisation of commodity prices”. Chidambaram was addressing the Development Committee meeting of the World Bank in Tokyo.
Rising food and commodity prices have adversely affected growth and social stability, as well as health, nutrition and education in poor countries, he said.
Countries need to quickly address the constraints on “farm to market”, he said.
Chidambaram’s comments come on the heels of corn being used for production of ethanol and funds floated by financial service firms such as Morgan Stanley, Goldman Sachs, CalPERS and others investing in commodity futures leading to surge in prices.
Volatility in the global economy will stay for some time and slower growth in major emerging economies have dimmed prospects of a quick turnaround. The availability of resources for development and the flow of private capital have contracted, Chidambaram said.
“At this juncture, we need a well-coordinated, collaborative and bold global effort to address these challenges,” he said.
Chidambaram, however, rued that the World Bank Group was constrained this time round in responding in the same exemplary manner as it had done in 2008-09, following the global financial crisis. These remarks came a day after Chidambaram told a meeting of the International Monetary and Financial Committee (IMFC) in Tokyo that global commodity prices — particularly energy prices — pose a major risk to growth and inflation in India.
inflation
Chidambaram said that inflation in India is expected to remain sticky in the near-term. While inflation rate has moderated, it still remains beyond the comfort zone of the RBI, he said.
He said India’s current account deficit (CAD) has remained elevated during the last few quarters due to widening of trade deficit reflecting worsening global situation.
However, with uncertain global macro-economic environment and slowing domestic growth, the financing of CAD will continue to remain a challenge, he said.
The IMF/World Bank meetings in Tokyo follow downward revisions in India’s growth projections by several multilateral bodies. In a recent report, the IMF had slashed India’s growth forecast for calendar year 2012 to 4.9 per cent from 6.2 per cent in July.
On its part, the World Bank recently cut India’s growth forecast for the current financial year to 6 per cent from the earlier estimate of 6.9 per cent, citing corruption and uncertainty in policy issues.
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