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Rising world food, oil prices to hurt India most: ADB news
06 June 2011

After dipping for four successive quarters, the bad news for GDP growth is set to continue, says a report. Rising global food and oil prices are projected to dent India's growth story worst than other major Asian economies such as China, Malaysia or Indonesia in the coming year.

According to an Asian Development Bank (ADB) estimate, which assumes a combined 30 per cent increase in global food and oil prices in 2011, the resultant inflationary pressure could knock off well over three quarters of a percentage point from India's growth this year and another 1.25 percentage points in 2012, Business Line reports.

 The projected hit on India's growth in 2012 is the highest among the major Asian economies included in the study.

Since August 2010, food prices have risen between 10 per cent and 35 per cent in various countries, while crude oil prices have increased by 45 per cent over the past year.

The ADB uses the Oxford Economics Global Model to assess such impacts. The model generates projections of key economic variables, based on the assumption that monetary authorities in the region will adopt a gradual tightening stance in the next two years as recovery takes firm hold.

The key assumption is that global food and Brent crude oil prices rise by 30 per cent in 2011 and moderately fall in 2012.

For India, the projected food and oil price surge this year is expected to take a bigger toll on growth vis--vis China, both during 2011 and in 2012.

The data point to a bigger hit on India's GDP next year on account of the global inflationary trend, as is the case with most major economies where Manila-based ADB has used the Oxford Economics Model to project growth, the report says.

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Rising world food, oil prices to hurt India most: ADB