Apex chamber FICCI has said that the current rise in inflation is the result of rising food prices and not an industrial driven one as India Inc is continuing to absorb increasing input costs to maintain the current selling prices rates.
According to FICCI's Q3 Business Confidence Survey, the outlook on investments has taken a hit owing to the spiralling capital goods prices coupled with the rising cost of credit - the Investment Index has plunged from 50 in the previous quarter to 39 this time.
Lower investments in the near future may have a long-term impact of slowing down the economy.
The wholesale price-based inflation for the week ended January 27 jumped to two year high of 6.58 per cent driven by the high prices of food articles like vegetables, fish and milk.
The survey drew responses from 320 companies had turnover ranging from Rs 2 crore to Rs 89,000 crore. The broad sectors included pharmaceuticals, textiles, telecom, food and beverages among others.
Lower investments in the near future may have a long-term impact of slowing down the economy, it added.
The survey indicates that the government's move to undertake reduction in customs duty on items used as industrial inputs and as capital goods is on the right track.
The findings indicate the urgent need for corrective measures from the government to ease the supply rigidities in the economy so that the subdued apprehension voiced now does not surface as a pronounced setback in the coming quarters, the survey said.