Mukesh Ambani, chairman of Reliance Industries which operates the world's largest single-location oil refinery at Jamnagar, today said the crisis in Iraq will lead to higher fuel prices which in turn will raise inflation.

"In an inter-connected world like the one we are living in today, what's happening around the world affects everywhere.

"The geopolitical crisis in the Middle East, especially the ongoing one in Iraq will increase crude oil prices which in turn will spike inflation in our economy," Ambani said at the 106th annual general meeting of Indian Merchants Chamber here today.

Crude oil prices have gone up by four per cent as the civil war has engulfed Iraq and some analysts believe that if the crisis worsens it could jack up India's oil import bill by over USD 20 billion this fiscal, at close to USD 200 billion.

On the growth prospects of the domestic economy, which slipped below 5 per cent for two consecutive years, Ambani said our progress is both irrefutable and unstoppable, but there are developmental hurdles like low education and poor infrastructure.

"We have a lot of challenges to overcome. But I am an eternal optimist.

As a democracy of 1.2 billion people, we are a country and a market like no other. Our 400 million strong middle-class now has solid discretionary income, which drives investment from across the world.

"We now have the power to drive the sub-continent," he said, adding that the country needs new social model based on equality of opportunity and a policy of reforms that lasts not only five or ten years but longer.