Rising interest rates likely to affect industry: FinMin

The government today admitted that rising interest rates are likely to affect industry.

"Industries sector have not specifically represented against the rising interest rates, though they are likely to get affected due to hardening interest rates," Minister of State for Finance Namo Narain Meena told the Lok Sabha in a written reply.

He said the RBI began the process of exiting from its expansionary monetary policy in October, 2009, so as to moderate rising inflation without hurting growth.

"Since January, 2010, the RBI has so far cumulatively raised the CRR by 1 per cent to 6 per cent, the repo rate has been increased by 100 basis points to 5.75 per cent and the reverse repo rate has been increased by 125 basis points to 4.50 per cent during 2010," he said.

He said that monetary measures work through a complex process of long and variable lags.

This means that monetary actions of the RBI will have the effect of cooling down inflation after some time.

To another question, Meena said, "These measures of the RBI are in consonance with the efforts made by the government to reduce inflation, while at the same time ensuring that the growth prospects of the economy are not adversely affected."

Food inflation came down to 10.35 per cent in the first week of August from over 20 per cent late last year. Overall inflation also declined to a single digit at 9.97 per cent in July.

However, industrial growth also came down to a single digit at 7.1 per cent in June for the first time in nine months.