"While I see good prospects for the global economy, there are a number of risks emanating from the behaviour of oil prices, adverse developments in the US housing market, persistence of global imbalances and possible emergence of inflationary pressures," Rakesh Mohan has said.

His comments were part of his statement to the International Monetary and Financial Committee at Washington posted on the RBI's website today.

Describing the decline in oil prices from their peak levels of August 2006 as the "most important factor" in reduction of risks, Mohan said the recent firming up of prices made it unclear at what level oil prices would stabilise.

"The geo-poliical risk has also not diminished. If oil prices continue to remain volatile, they would impart considerable uncertainties to growth prospects, particularly for oil importing developing countries," he said.

While prospects of monetary tightening in advanced countries has diminished following decrease in headline inflation, imparting stability to financial markets, core inflation still remains at an elevated level.

With many emerging markets continuing to experience inflationary pressures and have tightened monetary policy, inflation concerns may resurface "if oil prices turn volatile," he warned.