'Balancing act needed'

The Reserve Bank may have to do a tightrope walk on January 31 review of the monetary policy to ensure that buoyancy in economy continues and prices are kept under check, industry body CII said.

However, Assocham has strongly recommended reduction in the cash reserve ratio (CRR), status quo in prime lending rates and permitting market forces to prevail.

"The growth imperative would be high on the mind of the RBI Governor. However, a high inflation is a matter of great concern," said R Seshasayee, president of industry body CII.

While some of the supply side issues are being addressed through customs duty reductions, it would be interesting to see how the demand side is being viewed by the RBI, said Seshasayee. "We appreciate the balancing the RBI Governor is required to do, and we are certain that he would give the growth imperatives the attention that it deserves," added Seshasayee.

Assocham president Venugopal N. Dhoot said, "Rising CRR and interest rate will have a negative impact on economy in longer run, and project costs will go up, leading to mismatch between supply and demand."