As inflation shoots up, India Inc seeks lower lending rates

New Delhi: India Inc on Tuesday pitched for lower lending rates and nudged policymakers to take measures to improve the credit flow to manufacturing and infrastructure sectors as wholesale inflation rose at the fastest pace of 5.25 percent in two-and-a-half years in January.

"The industrial economy is still weak and there is a need to improve the flow of credit to the manufacturing and infrastructure sectors.

"We also need to see a further reduction in the lending rates by banks and we hope that RBI's guidance on this to the banks will be followed up in the form of further reduction in rates for companies," Ficci President Pankaj Patel said.

Industry chamber Assocham urged the policymakers to take corrective measures to address the situation of rising interest rates in future and limited capacity of industries to invest in future.

"Continuous increase in prices of petrol and high-speed diesel due to rise in global crude oil prices have to be taken care of by the policymakers since it may have impact on import bills and subsequent impact on exchange rates," Assocham President Sandeep Jajodia said.

"Based on the expected trajectory of food prices, commodity prices and exchange rates, we expect WPI inflation to rise further in February, before easing marginally in March. Accordingly, the wedge that has opened up between WPI and CPI inflation in January 2017, is likely to persist in the remainder of this quarter," said Aditi Nayar, Principal Economist at rating agency ICRA.

Wholesale inflation shot up to a 30-month high of 5.25 percent in January as rising global crude oil prices spiked domestic fuel cost, even as food prices moderated.

The wholesale price index (WPI) based inflation, reflecting the annual rate of price rise, in December stood at 3.39 percent.

In January 2016, the print was (-)1.07 percent.

The last comparable high level of WPI was witnessed in July 2014 at 5.41 percent.

As per Commerce Ministry data, inflation in the 'fuel and power' basket more than doubled to 18.14 percent in January, up from 8.65 percent in the previous month.

As per the data, food inflation basket witnessed contraction for the second month in a row with inflation at (-)0.56 percent in January as against (-) 0.70 percent in December.