Rising food, oil prices to hit global economy: India

India has sought a global consensus on spiralling prices of food and oil in many countries, saying the problem would transform into a global contagion if timely action is not taken.

"Unless we act fast for a global consensus on the price spiral, the social unrest induced by food prices in several countries will conflagrate into a global contagion leaving no country developed or otherwise unscathed," Finance Minister P Chidambaram told the Development Committee of the World Bank and the International Monetary Fund.

"The global community must collectively deliberate on immediate steps to reverse the unconscionable increases in the price of food which threatens to negate the benefits to the poor nations from aid, trade and debt relief," the minister told the 77th meeting of the committee.

Describing the rise in global oil prices as unjustified, Chidambaram urged the oil producing countries to rethink their pricing policy.

"The prices of crude oil that have shot up to the region of $110 a barrel do not reflect either the cost of producing the oil or the risks inherent in the market and in fact, not even the inter-play of demand and supply. These runaway prices require producer nations to seriously contemplate the management of production and pricing policy," he said.

"These food prices which hit the poor hardest, are expected to remain firm in the medium term unless we make serious interventions. The demand for biofuels will probably increase, and energy and fertiliser prices could be expected to remain high in the medium term."

The minister also asked developed countries to cut off subsidies on food crops for bio-fuel production.

"In a world where there is hunger and poverty, there is no policy justification for diverting food crops towards bio-fuels. Converting food into fuel is neither good policy for the poor nor for the environment," the minister said.

Chidambaram noted with concern that aid has declined in both 2006 and 2007 that, in his view, flies in the face of the the Monterrey Consensus target of achieving official

developmental assistance (ODA) level equal to 0.7 per cent of GNI and the Gleneagles commitment in 2005 to double ODA to Africa in five years.

"On the demand side, the capacity of developing countries to absorb scaled up foreign assistance has increased. However, the quality and quantity of aid still needs considerable improvement, especially with regard to its predictability," he said.

On Millennium Development Goals, Chidambaram noted that although tremendous strides have been made since 2000, the progress across MDGs varies widely.

"While we would achieve the target of halving extreme poverty before 2015 on a global level, Sub-Saharan Africa is expected to miss this target by a wide margin. In fact, Sub-Saharan Africa would fall short of all the MDGs in varying degrees.

"The position of Fragile States, many of which are in Sub-Saharan Africa, has actually worsened as compared to where they were earlier in terms of some of the MDGs. None of them are expected to fully achieve any of the MDGs by 2015," the minister said stressing that the lack of progress on the MDGs related to maternal and child mortality is disturbing.