Be a PRO & get up to 50% off on select brands. Explore Now

Need global action to tackle price rise in commodities: RBI

Attributing rising commodity and crude oil prices to excess liquidity in the global market, Reserve Bank Governor D Subbarao today underlined the need for coordinated action to deal with the situation.

June 23, 2011 / 10:42 PM IST

Attributing rising commodity and crude oil prices to excess liquidity in the global market, Reserve Bank Governor D Subbarao today underlined the need for coordinated action to deal with the situation.


"...in the current juncture, one of the driving forces behind hardening commodity prices in recent months is the excess liquidity in the global system which has possibly triggered financialisation of commodities," Subbarao said in a lecture to Australia National University in Canberra.


Crude oil prices have surged substantially in the last two years. They have nearly doubled to USD 113 a barrel from about USD 60 in the beginning of 2009.


Stressing upon the need for co-ordinated effort on capital movement, Subbarao said, managing capital flows is not the exclusive problem of emerging market economies (EMEs).


He said, "Even as we debate what EMEs should or should not do to manage excess capital flows, we should remember that to the extent that lumpy and volatile flows are a spillover from policy choices of advanced economies, managing capital flows should not be treated as an exclusive problem of
emerging market economies."


Subbarao added, "How this burden is to be shared raises both intellectual and practical challenges. The intellectual challenge is to build a better understanding of the forces driving capital flows, what type of policy instruments, including capital controls, work and in what situations."


He said the practical challenge is the need to reach a shared understanding on a framework for cross-border spillovers of domestic policies in capital originating countries and the gamut of policy responses by capital receiving nations.

Subbarao also emphasised that capital inflows, far in excess of a country

first published: Jun 23, 2011 07:54 pm

stay updated

Get Daily News on your Browser
Sections