Rate hike will dampen growth: Assocham

16 Jun 2011

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The 25 basis point increase in lending rates announced by the RBI will slow down the economy further and restrict fresh investment and industrial growth in the country, according to industry body Assocham.

RBI, despite a chain of rate hikes over the past few quarters, has not been able to rein in inflation in the country even as the lending rates are currently hovering above 9 per cent, said Dilip Modi, president of the Associated Chambers of Commerce and Industry (Assocham).

Modi said the interest rate hikes have slowed down cement sales and steel imports, even as inventories with auto firms are piling up. "High input prices, rising finance costs and global uncertainties are adding to negative sentiments," he added.

"All these factors in a high interest rate environment will most certainly put the brakes on new investments and put corporate India in a difficult position to maintain the growth momentum," he said.

Despite the 15 per cent increase in advance tax payments by corporates in India, Modi said the economy seems poised for a deceleration.

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