MUMBAI: With geo-political factors impacting crude prices, India needs to have a good oil hedging policy as the volatility will continue to rise, former RBI Governor, Raghuram Rajan said on Wednesday. He said the issue has been discussed in the past and it began with a strategic petroleum reserve, but beyond that there is a need to think about hedging oil prices especially when it comes to levels such as now. “There is a strong need for an oil hedging mechanism for a country like ours which is so dependent on oil,” he said.
The problem is many who are entrusted with this, fear the chance of oil prices falling even further if you hedge it, but that has to be taken as a national consequence of the hedging programme. “We, as a country, must think about whether we should start this process,” he said. “The proof of the pudding is sometimes in the eating. If 25 million people are applying for 90,000 jobs, it suggests that we are not supplying that many jobs and that means growth is not strong enough at least in the job creating areas,” he said.
According to him at this time one of the biggest areas of concern is state deficits, especially during election time where many states are promised waivers and also dole out goodies to attract votes.”This, often hampers them later on because ultimately what is suffering is investment,” he said. Rajan said if we look at agrarian unrest, one of the big concerns is that agrarian productivity has not increased as it should, and the prices have been fluctuating.
“The effect of all this is that people are getting more and more concerned that they don’t have access to a good livelihood,” he added.On land acquisition for projects, Rajan said there is a need to improve the pace of the process by making land rights much clearer, as there are some states where land rights are opaque, and also having a decent price as well as some kind of long-term incentives.
There is a need to focus on macro stability and distress sectors such as agriculture, banking and power sector, and try to get them back on track, he noted. “There is no immediate reason to be overly concerned about India but there is a reason to revisit our growth path to ensure that it is stable, sustainable and equitable. If we do that we are on the right track,” Rajan said. Rajan also emphasised on having good and reliable data in the country to help decision makers formulate policies.
