New Delhi (Agency): Asserting that economic fundamentals are strong, Finance Minister Pranab Mukherjee said the government will "take care" of the impact of rising global crude oil prices, which are hovering around two-year high due to crisis in Egypt and other Arab countries.

Attributing the recent slide in stock market to continued selling by foreign institutional investors, he said that the economy during 2010-11 would record a growth of 8.5 per cent, up from 8 per cent a year ago.

Mukherjee's remarks come at a time when crude oil prices have soared to a 28-month high of USD 102 a barrel following deepening of political crisis in Egypt and fears of the problem striking Yemen.

"Unfortunately, developments in the Middle East and its impact on the Arab world are causing uncertainty about (oil) production (and) about (its) availability. We are watching the situation (closely)," he said, adding the government will "take care" of the impact of high prices on the domestic industry.

Unrest in Egypt fueled Brent crude price to an intra-day high of USD 102.08 per barrel yesterday, its highest level since late September 2008 after the Lehman Brothers bankruptcy sent financial markets into a tailspin.

Pointing that India had managed the situation when crude oil price had touched a record high of USD 147 per barrel in July 2008, Mukherjee said his ministry was in constant touch with the Oil Ministry on the unfolding situation.

The spike in global rates has meant that the gap between domestic retail fuel price and their cost of production has widened, necessitating action -- either by way of price increase or hike in government subsidy.

Raising prices of auto fuel, however, may not be an easy option at a time when the government is struggling to calm down inflation which rose to 8.43 per cent in December, 2010, from 7.48 a month ago.

Giving higher subsidy to the oil marketing companies, on the other hand, would amount to sacrificing fiscal prudence.

Noting that "the stock market has its own mind and it take cues from developments all around," Mukherjee said the volatility in the capital markets was on account of "continued selling by FIIs".

The benchmark index Sensex of the Bombay Stock Exchange had lost 5.90 per cent in the past five trading sessions with investors resorting to hectic selling in wake of Egypt crisis and high inflation etc.

The markets, however, recovered today gaining 68 points to close at 18,090.62 points.