Fuel price hike fuels recession fear

By agencies   |   Tuesday, 13 June 2006, 07:00 Hrs
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NEW DELHI: The Government's recent decision to pass on the rise in oil prices to consumers will not only inflate their petrol and diesel bills, it has also further fuelled the concerns over a possible economic recession being round the corner, analysts said.

Global equity research firm Lehman Brothers has downgraded its GDP growth forecasts for India citing the surge in oil prices as a major reason, while a number of economists have expressed similar concerns.

The economists expect the recent hike in retail petrol and diesel prices to not only propel further a sharp rise in household expenses, but also see increased transportation costs eventually leading to a severe impact on the manufacturing and agricultural sectors.

The continuing downslide in the stock market, coupled with sluggish commodity prices, interest rate hike and inflation concerns, has already led to a number of economists forecasting an economic slowdown in the near term, while the rising fuel prices are likely to worsen the situation.

International Monetary Fund's Managing Director Rodrigo de Rato said in a press conference in Australia that the global economy faces growing downside risks, such as rising oil prices, plunging stock markets and significant global trade imbalances.

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