NEW DELHI: The Confederation of Indian Industry (CII) has warned that any rise in interest rates by the Reserve Bank of India (RBI) will not only affect the performance of the manufacturing sector but also upset the momentum of the economy growing at eight per cent in the current fiscal.

In a release issued here on Monday, it has expressed the hope that the RBI will not increase interest rates in the forthcoming quarterly review of the annual monetary policy (2006-07).

"An increase in interest rate to contain inflation is not advisable at this point of time as the current rate of inflation at around five per cent is more due to supply constraints than demand increase," it has said.

High oil prices

The apex chamber has pointed out that with global oil prices continuing to rise incessantly, the cost to producers is also on the rise.

"In this situation, any rise in the interest rate will only add to the cost and affect the supply adversely which in turn will lead to further hike in inflation rate,'' it says.

The CII has also warned that hike in interest rates will affect the manufacturing sector performance. It has argued that with the economy having picked up the momentum of growing at around eight per cent, this would be an "upsetting factor.''

It has suggested that inflation should be curbed by removing supply bottlenecks. "The Government should ease the import of select agricultural products which are in short supply and keep a close watch on the monsoon to adjust the policies suitably,'' it says.

Printer friendly page  
Send this article to Friends by E-Mail