India Inc for review of RBI's rate tightening policy

Leading India Inc representatives today made a strong plea to the Reserve Bank to review its rate tightening policy, saying the high cost of credit is having an adverse impact on growth.

Quoting a recent study, industry body FICCI''s Vice-President and HSBC's Country Head, Naina Lal Kidwai, said a majority of firms feel inflation and successive rate hikes in the key monetary variables "have started having a bearing on industry's performance."

"India Inc is worried about the significant impact of the increasing inflation and interest rates on their operations...further rate hikes by RBI could impact investment plans and activity levels adversely going forward," she said during the customary pre-policy meet with RBI top brass ahead of the annual monetary policy announcement due on May 3.

To tame the headline inflation number which stood at a higher-than-comfortable 8.31% in February this year, RBI has hiked its key rates -- the repo at which it lends and reverse repo at which it absorbs extra cash -- a record eight times in the last 13-months.

As the rate hikes get transmitted and result in higher cost of credit, industry gets worried and has voiced fears of the growth momentum getting stifled.
RBI Governor D Subbarao had earlier said the central bank is "struggling" in managing the growth-inflation dynamic.