Another global slowdown a possibility: Mukherjee

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Finance minister Pranab Mukherjee on Friday said another global slowdown was now a possibility as international economies suffer from rising inflation and fuel cost.

“Another global slowdown appears to be a possibility. Civil strife in the Middle Eastern countries have also contributed to uncertainty and specifically sticking of oil prices,” Mukherjee told reporters here on the sidelines of the third-India-Africa hydrocarbon conference being held here.

According to Mukherjee, recent events like downgrading of US credit ratings by Standard and Poor's and sovereign debt crises in Europe has been adding to the global economic uncertainty. “The US has suffered an unprecedented debt rating downgrade. It is experiencing a slowdown and unemployment. Sovereign debt crises in Europe continues to be unabated,” he said. The finance minister added that emerging economies which were driving the global economy have started facing rising levels of inflation which includes fuel cost which is translating into slower growth rates. “Emerging economies which have contributed to the global economy are struggling. They are facing problems of inflation, high fuel cost, interest rates and a slowing of growth, including in India.” Even though the annual food inflation touched a three-and-a-half-year low at 6.6 percent for the week ended Nov 26, the industrial output has been on the decline.

The index of industrial production which is a barometer of factory output fell sharply in September at 1.9 percent, growing the slowest in over two years as rising interest rates and a slump in investments started to bite. The country's economic growth also retarded to the slowest pace in two years, at 6.9 percent for the quarter ended September, with an abysmal expansion in manufacturing and a decline in mining output.