With the threat of Iraq war looming large, the Economic Survey on Thursday said India could finance higher oil import bill in case international crude prices shoot up as the country has a strong $73 billion foreign exchange reserve.
"India is now one of the top reserve-holding, emerging market economies. The country is capable of financing higher import bills in the event of steep escalation in global oil prices or other exogenous developments," the survey, which was tabled in Parliament, said.
Rapid escalation of tension in the Persian Gulf during the last quarter has seen steep rise in global crude oil prices.
"There are serious concerns regarding the growth prospects of emerging market economies, particularly those in developing Asia, in the coming months. Apart from large food stocks held in the central pool, the huge volume of foreign exchange reserves held by the country provide comfort in an uncertain global situation.
Resilience of India's performance has been vindicated by its successful handling in the recent past a series of external shocks, like the Asian currency crisis of 1997, crude oil shock of 2000 and global economic slowdown in 2001, it said.
"Given our rising dependence on imported crude oil (70 per cent of total requirement of 105 million tonnes), the economy needs to be insulated from continuing volatility in international crude oil prices impacting on our balance of payments and the oil security of the country," the survey said.