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'RBI measures would hit expansion plans'

India Inc expresses concerns that RBI's steps to tighten money supply would have an impact on expansion plans of corporates.

business Updated: Jun 25, 2008 16:49 IST

India Inc expressed concerns on Wednesday that Reserve Bank's steps, announced late evening on Tuesday, to tighten money supply further would have an impact on expansion plans of corporates.

"Steps taken by the apex bank would affect the expansion plans," Assocham President Sajjan Jindal said. However, he hoped that corporates' global acquisition plans will continue as they raise funds mainly from abroad.

Another industry chamber Ficci said RBI's decision has substantially pushed up the "interest cost for industries, particularly in a phase of acute international competition ...The current rate hike will further add to that burden".

"As a result of this, the path of overall GDP growth will also get influenced. We are already in a downward phase and this moderation in growth is clearly borne out by the IIP numbers," Ficci vice-president Harsh Pati Singhania said in a statement.

CII said action is required at global level to deal with the current phase of price pressure, which is largely led by global supply.

RBI on Tuesday increased the short-term lending rate (repo) from 8 per cent to 8.50 per cent with immediate effect. Besides, the central bank also raised the amount that banks need to maintain with RBI (CRR) by 50 basis points to 8.75 per cent in two stages, effective from July 5 and July 19.