Industry chambers were disappointed with the 25 basis point hike in repo rate by the Reserve Bank of India on Friday.

“When a cumulative rate hike of 325 basis points since March 2010 could not control inflation, how will another 25 basis point hike deliver? It is ironic that the RBI is now clearly banking for inflation rates to start declining toward the latter part of the current fiscal, based purely on base effect,” said Dr Rajiv Kumar, Secretary General, Federation of Indian Chambers of Commerce and Industry (FICCI).

The increase in inflation rate to 9.8 per cent in August from 9.2 per cent in July 2011 has more to do with a lower base in the like period the previous year, FICCI said in a statement.

Festival season

With the festival season approaching, this policy action is likely to quell domestic demand.

The issue of declining rupee could have been dealt with separately through the RBI exchange rate policy, FICCI said.

“Global conditions like high input costs, economic uncertainties, elevated commodity prices in a high-interest environment will most certainly put brakes on new investments and put corporate India in a difficult position,” said Mr D.S. Rawat, Secretary-General of The Associated Chambers of Commerce and Industry of India.

Mr Salil Bhandari, President, PHD Chamber, said, “The situation for industry has turned from bad to worse by the continuous hikes in policy rates. The recent hike in petrol prices by Rs 3 per litre is set to spell further distress in the already stagnating industrial growth. The combined effect will only stoke inflation and further depress the manufacturing sector already on a downtrend.”

Mr Chandrajit Banerjee, Director-General, Confederation of Indian Industry, said the rate hike was expected.

He said speedy clearance of infrastructure projects, implementation of the manufacturing policy and removal of bottlenecks in the distribution of food products were required to step up the growth momentum.

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