RBI`s monetary tightening to adversely affect growth: India Inc

India Inc on Thursday said the continuous monetary tightening by the Reserve Bank will affect "adversely" growth prospects of the country.

Last Updated: Mar 17, 2011, 16:43 PM IST

New Delhi: India Inc on Thursday said the continuous monetary tightening by the Reserve Bank will affect "adversely" growth prospects of the country.

"Series of hikes in repo and reverse repo rates have had a visible impact on the industrial production numbers, which have decelerated substantially in recent months," industry chamber Ficci said.

The Reserve Bank today raised its short-term lending and borrowing rates, for the eighth time since March 2010, by 25 basis points in a bid to rein in inflation.

"RBI`s action in raising policy rates, though expected, will adversely affect growth prospects ... There is also a lot of nervousness in the market given the global developments," Ficci Director General Rajiv Kumar said.

The overall inflation was marginally higher in February at 8.31 percent against 8.23 percent a month ago.

Assocham said the 25 basis points increase in short-term lending (repo rate) and borrowing (reverse repo rate) by RBI will hit the manufacturing sector which is already witnessing a slowdown due to rising input costs and wages.

Assocham President Dilip Modi said: "RBI should have waited till the new agriculture crop which is expected next month".

"The continuous hike in policy rates can have impact on economic growth and consumption demand," PHD Chamber President Salil Bhandari said.

Deceleration in manufacturing and mining sectors pulled down the factory output growth rate to a meagre 3.7 percent during January from 16.8 percent in January last year.

Fixer said that the government would have to focus urgent attention to addressing supply side constraints and improve the investment environment.

PTI