RBI should cut rates to bolster industrial growth: Assocham

"Assocham is urging the RBI, as it gives finishing touches to its credit policy review, to reverse aggressively the direction of the policy stance and help industrial growth," Assocham President Rajkumar N Dhoot said in a statement.

"If such a course is not followed, the consequences for the industrial growth and its overall impact on the GDP would be quite adverse," he said.

Interest cost was adding to inflation rather than controlling it, Dhoot said, adding that a study found that while core inflation has remained well below the overall inflation, the capacity of the manufacturers to absorb the rising interest costs is fast reaching the breaching point.

Inflation, as measured by the Wholesale Price Index (WPI), was 7.25% in June much above the comfort level of 5-6%. The retail inflation stood at 10.02% in June.

Industry as well as the Commerce Ministry has been seeking cut in interest rates by the RBI to boost growth, which fell to a nine-year low of 6.5% in 2011-12.

Dhoot said the that RBI should be guided by core inflation, "which the RBI itself has admitted, is within control".