RBI measures will decelerate growth: FICCI | business | Hindustan Times
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RBI measures will decelerate growth: FICCI

The monetary measures taken by the RBI to contain inflation, good as they may be initially, will slow down growth in the long run, says a survey by a leading business chamber.

business Updated: May 06, 2007 09:41 IST

The monetary measures taken by the Reserve Bank of India (RBI) to contain inflation, good as they may be initially, will slow down growth in the long run, says a survey by a leading business chamber.

Industries across sectors such as cement, pharmaceuticals, textiles, food and beverages, heavy equipment, financial services, paper, metal, chemicals, IT, infrastructure, auto, real estate, steel and petrochemicals have all indicated slower growth in the months ahead, said the Federation of Indian Chambers of Commerce and Industry (FICCI).

The survey was conducted on 418 companies having annual turnover between Rs20 million and Rs500 billion.

According to the survey, measures taken by RBI such as increasing the rates for short-term lending by commercial banks will affect consumer spending, which in turn will impact industries such as food processing, textiles, housing, construction and automobiles due to reduced demand.

On the other hand, industries such as basic metals and alloys, cement, chemicals, machinery and equipment and non-metallic mineral products will not feel the impact much as they do not directly depend on consumers' demand.

The anti-inflationary measures of RBI have affected the small and medium enterprises (SMEs) more than the large firms, as the latter are able to raise resources outside the bank at cheaper rates, says FICCI.

But the SMEs, which have no other option but to borrow from the bank despite soaring interest rates, suffer the most.

The survey, however, reflected a positive outlook in the next six months for investment and exports, which are expected to generate more employment.