Oil spoiled India's growth story: FM

'Price spike shaved 1 percentage point off GDP growth'.

Calling for some sort of an understanding on prices between oil producing and oil consuming nations, Finance Minister P Chidambaram today said speculation that was driving oil prices had shaved 1 percentage point off the country's growth rate.

"We could have actually grown by 9-9.5 per cent, but for the increase in oil prices," he said at the India Economic Summit, organised by the Confederation of Indian Industry (CII) and the World Economic Forum, here today.

"There has been no change in demand and supply. How did prices fall from $78 to $58 per barrel? We must come to terms with the fact that oil producing countries are exploiting developing countries. The world needs to come to a sort of understanding on this issue," he felt.

A summit discussion paper on the key risks for India attributed "a large part of the increase in world oil prices to the emergence of a middle class in India."

Mentioning Russia, which had based its budget on the assumption of oil prices at $45 per barrel, Chidambaram said the price spiral to $78 a barrel had proved a windfall for the country.

"What is happening is certainly speculative in nature and I hope better sense prevails."

The finance minister said he had sought a pricing band, one in which oil consuming nations guaranteed a minimum price.

"I have offered that we have a system where we ensure that prices do not go below a certain level, while the oil producing countries assure us of prices not going above a certain level," he said.

Every increase of $10 per barrel in the price of oil shaved about half a percentage point off the global growth rate. The finance minister highlighted the need for the country to use its coal reserves and push for alternative energy sources, including nuclear energy.

India now ranks sixth in the world in total energy consumption and needs to accelerate the development of the sector to meet its growth aspirations. The country meets 55 per cent of its energy needs from coal and 32 per cent from petroleum, with 70 per cent of the latter being imported (one-fifth of the total energy use).

This is likely to increase, given that India's per capita energy use stands at 13.3 million British thermal units (MBTU), as compared with China's 33 MBTU (in 2002).

Among other risks faced by the country, Chidambaram termed HIV/AIDS as a "frightening" one. "We are shy talking about it. Earlier, we were in denial mode about it. It is a problem in India and we are addressing the issue," he said.

By some estimates, India has the highest burden of both HIV and TB pandemics, with between 5.1 and 5.7 million people infected with HIV and 1.8 million cases of TB, mostly comprising adults in the productive age group.

Referring to environmental concerns, he said the developed world must assist countries like India in acquiring technologies like clean coal and provide uranium for nuclear energy production.

He also warned that the next major war would be fought over water. "We have 7000 km of coastlines and we need to look at recycling and desalination of sea water," he added.