Unprecedented fuel price a new challenge to economy: Sitharaman

Finance minister Nirmala Sitharaman said on Tuesday that the Russia-Ukraine crisis has led to a disruption of the global value chains likening the impact of the war to the pandemic. Responding to the debate on the Finance Bill in Rajya Sabha, Sitharaman also pointed out that the Ukraine crisis and the unprecedented rise in the fuel prices are new challenges to the Indian economy.

“At the time of the Budget presentation, I had not taken on board the Omicron. Now we are also facing the situation of a full blown war in Ukraine, which is not some war in some corner of the world, but it seems to be having impact on all the countries the way the pandemic did,” Sitharaman said.

“I just want to highlight that Ukraine is a new factor. No doubt. The unprecedented hike, in the fuel prices is also a new challenge,” she added. In the wake of the ongoing Russian invasion of Ukraine, the global crude oil prices touched $140 a barrel stoking inflation and high input cost fears in the Indian economy. With lockdown in several parts of China due to Covid resurgence, the global oil prices have since then cooled down slightly but still continue to hover over $110 per barrel.

In one of the replies to questions in the Lok Sabha earlier this week, the Ministry of Finance said India is closely monitoring the global price movement and its impact on the Indian economy.

In response to questions on impact of the Ukraine crisis on the Indian economy, the Ministry of Finance told the Parliament on Monday that oil public sector undertakings (PSUs) have diversified their petroleum basket and the government too is committed to use the strategic petroleum reserves to contain market volatility. Ministry maintained that the impact on consumption will depend on the duration for which the oil prices remain elevated.

During the reply, finance minister also pointed out that despite all uncertainties, India has remained among the top destinations for foreign direct investment.

“The FDI inflow into India in FY 2021 was $81.72 billion. In FY 2020, it was ₹74.39 billion. India has continued to remain in the top-five FDI recipient countries. I would like to say that in the seven-years-and-nine-months of prime minister Modi's government till December 2021, the FDI inflows into India has been ₹500.5 billion. This is about 65% higher than the FDI inflows during the entire 10-year regime of the UPA,” Sitharaman said. The Finance Bill 2022 was later passed by the Rajya Sabha.