India has warned that surging oil prices could jeopardise recovery of the global economy which is already vulnerable to a variety of risks, including political and social turmoil in parts of the world combined with natural disasters.

"The global recovery may be jeopardised by a sustained rise in oil prices," RBI Governor Duvvuri Subbarao told the Spring Meeting of the IMF here last evening. "Apart from the inflationary pressures confronting particularly the emerging and developing countries, there is the danger of a slowdown in the global economy unless oil prices moderate from current levels," Subbarao said in his address to the International Monetary and Financial Committee.

Furthermore, since the summer of 2010, several natural calamities and consequent food supply constraints have collided with the post-crisis resurgence of demand, he noted. "World food prices have surged considerably due to concerns about low future supplies because of bad weather and low inventories, raising concerns about food security. Speculative movements in commodity derivative markets are also causing volatility in prices," he said.

A variety of risks, including political and social turmoil in parts of the world combined with natural disasters, have made the global recovery vulnerable, Subbarao said, adding that financial conditions have turned volatile and uncertain, with risks of adverse feedback loops into the global economy.

"Recurring sovereign debt fears have affected market confidence. In the crisis-affected economies, financial systems are yet to be fully repaired. While the sense of crisis has waned, new challenges have surfaced," he said.

Subbarao said while the trough of the crisis definitely appears to be behind and there are signs the recovery is consolidating, new challenges facing the global economy render it vulnerable. "We have to remain vigilant and be prepared to deal with all threats, old and new, as we repair and rebuild. The global problems we are facing today are complex and not amenable to easy solutions," he said.

Many of them require significant and often painful adjustments at the national level, and in a world divided by nation-states, there is no natural constituency for the global economy, he said.

At the same time, the global crisis has shown that the global economy as an entity is more important than ever, Subbarao said. "Given the deepening integration of countries into the global economic and financial system, uncoordinated responses will lead to worse outcomes for everyone," he said.

Noting that the overarching problems confronting the international monetary system stem from weaknesses in detecting and communicating early warnings of impending crises and management of global liquidity, the RBI Governor said this calls for fundamental reform of the international monetary system. "It is also important to evolve a mechanism to address the challenges of stemming volatile capital flows and to strengthen multilateral adjustment mechanisms to deal with imbalances and sources of instability," he argued.

Stating that the surveillance function is critical to the IMF's overall mandate, Subbarao stressed that ensuring consistency and comprehensiveness across the various levels of surveillance is important, as is the candour and evenhandedness of the IMF - that systemic risks are pointed out irrespective of where they may originate. "We need to stress that multilateral surveillance by the IMF should not lose sight of sovereign debt concerns of developed countries by adopting tighter screening criteria for developing countries that have actually seen fiscal improvement relative to the advanced economies," he said.