India Inc today expressed fears that the Reserve Bank of India (RBI) increasing key policy rates would adversely impact industrial growth, which had slipped to 2.7 per cent in November.
"We will have to wait for the upcoming industrial production numbers and Ficci would urge RBI to keep an open mind regarding fine tuning interest rates in the light of industrial performance," Ficci Secretary General Amit Mitra said.
He added that any further signs of weakening of industrial performance should be followed by a downward revision in interest rates to give a boost to industrial and economic growth.
The Reserve Bank has hiked its short-term lending and borrowing rates by 25 basis points (0.25 per cent) each with immediate effect to tackle high inflation, signalling further upward movement in the interest rates.
The central bank in 2010 raised the key policy rates six times to contain inflation, which shot up to 8.43 per cent in December on high prices of food items, from 7.48 per cent in November.
Echoing the views expressed by Mitra, industry chamber CII said RBI is setting the stage for a series of rate hikes that will have a negative impact on the investment momentum going forward.
"The persistent shortage of liquidity in the banking system has already raised expectations that interest rates will harden considerably in the coming year," CII said.
Therefore, the central bank needs to take aggressive measures to ensure the availability of funds for sustaining growth, it said.
Assocham President Dilip Modi said that the monetary policy is as per expectations as any bigger steps by RBI could have impacted the growth trajectory which has shown consistency in the last few quarters.