Industry representatives have asked the Reserve Bank of India to review any plans to tighten key rates further, as the higher cost of credit may have a negative impact on growth in the country. “India Inc is worried about the significant impact of increasing inflation and interest rates on their operations,” said a statement from industry chamber, FICCI, after the pre-policy consultation meeting with the RBI officials on Wednesday.

This meeting was also attended by industry bodies such as the CII and the Assocham, credit rating agency CRISIL, besides Mr B. Muthuraman, Vice-Chairman, Tata Steel, and Mr Y.M. Deosthalee, Chief Finacial Officer, Larsen & Toubro. Ms Naina Lal Kidwai, Vice-President, FICCI and HSBC's Group General Manager and Country Head, said that a recent business confidence survey from the industry body found that a majority of the surveyed firms feel inflation and successive hikes by the RBI in the key monetary variables (seven times since March 2010) have started having a bearing on industry's performance. In the meeting, she shared with the RBI officials, the domestic industry's wariness about the overall economic situation due to high inflation, particularly food inflation, and the consequent RBI counter-measures.

“With the borrowing calendar of the sovereign kicking off from the first week of April, and liquidity conditions expected to remain in the deficit mode, further rate hikes could impact investment plans and activity levels adversely,” said the FICCI statement.

Speaking after the meeting, Mr Niranjan Hiranandani, Managing Director, Hiranandani Constructions, said that an increase in interest rates will be a setback for those buying their first house, as property prices are already high. “I don't see a scope for a further rate hike. For the industry, the main challenge for the next one year will be the rising commodity costs, like that of oil. But this is beyond the capacity of any single agency to manage,” he said.

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