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India Investment To Be...

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The RBI raised its benchmark lending rate by 50 basis points to 9 percent, the highest in seven years, in a bid to contain double-digit inflation in the country. Previously in June, it had raised the rate by 75 basis points in two steps.



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It also raised the cash reserve ratio by 25 basis points to 9.0 percent, following a 50 basis point hike in June.

"Using these monetary tools could have a further negative impact on the southward movement of industrial activity," the Federation of Indian Chambers of Commerce and Industry (FICCI) said in a statement.

"While some investments may no longer be viable given the risen interest rates, some others will be taken off the drawing board due to non-availability of adequate funding," FICCI said.

The RBI on Tuesday also cut its growth forecast for this fiscal year to around 8.0 percent from 8.0-8.5 percent previously. India grew at 9.1 percent in 2007/08.

The central bank said in its quarterly monetary policy, it would aim to bring inflation to 7 percent by March 2009, compared with an earlier target of 5-5.5 percent for the year.

The Associated Chambers of Commerce and Industry said the monetary measures would not be able to bring down prices, as inflation was driven by supply-side factors.

The Confederation of Indian Industry (CII) said firms were looking to expand capacities and these investments could maintain the growth momentum.

"Increase in interest rates could impact the investment momentum and corporate cash flows," CII said in statement.

(Reuters)


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