Concerned over slowdown in
industrial production growth, which plunged to a 21-month low of 3.3 per cent in July, industry today called upon the Reserve Bank to halt its policy of hiking interest rates.
"The
July IIP data was disappointing and vindicates our expectation that the industrial sector will continue to show weak performance... CII urges the RBI to refrain from raising interest rates at its forthcoming monetary policy meeting," CII Director General Chandrajit Banerjee said.
The July data was disappointing as compared to a healthy 9.9 per cent growth in the year-ago period. Also, the IIP grew by 8.8 per cent in June.
The capital goods sector was the worst performer with a decline of 15.2 per cent during the month, reflecting erosion of investor confidence. Manufacturing and mining were other laggards.
"CII is concerned about the investment outlook, given the weakness in the capital goods sector. The outlook for the sector remains weak, given that order books of capital goods companies are showing signs of moderation," Banerjee said.
The chamber asked the government to fast-track the implementation of key projects.
Ficci termed continuation of negative growth in sectors like chemicals, textiles and apparels as a cause for concern and said government should provide relief to the industry by lowering the interest cost burden.
"The situation is indeed serious as both manufacturing and mining sectors' growth has dipped significantly vis-a-vis last year, and unless corrective policy actions are taken we may enter the negative territory soon," Ficci Secretary General Rajiv Kumar said.
The slowdown in factory output is worst since October 2009 when it grew at 2.3 per cent when the economy was reeling under the impact of the global financial crisis.
The slowdown is being attributed to high interest rates and worsening global economic scenario.
RBI, which has raised key interest rates 11 times since March 2010, is scheduled to review the rates again on September 16.
Inflation has been above the 9 per cent mark since December 2010 and experts have said the August number, which is to be released on September 14, is likely to be near double-digit, thus putting further pressure on the apex bank to continue with its policy of monetary tightening.
"Any increase in interest rates at this stage will directly impact capacity additions and job creation. Monetary tightening measures to combat the stubbornly high inflation could also have long-term ramifications," Assocham Secretary General D S Rawat said.
The PHD Chamber also asked the RBI to halt its monetary tightening and said any further rate hikes will affect both the industry and the overall economy.
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