High borrowing costs, inflation choke industrial growth: PHD Chamber

High borrowing costs, inflation choke industrial growth: PHD Chamber

High borrowing costs, inflation choke industrial growth: PHD Chamber

No.PR-6
April 11, 2014
New Delhi

           High borrowing costs, inflation choke industrial growth: PHD Chamber

High borrowing costs coupled with increased cost of production in terms of increased wages, cost of raw materials, energy and fuel cost were responsible to choke the growth of industry during the past many quarters, said Mr. Sharad Jaipuria, President, PHD Chamber in a press statement issued here today.

Inflation was generalized because of increased borrowing costs and supply side constraints vis-à-vis production cuts and declining sentiment for production. Supply side constraints again impacted the inflationary expectations and resultant increase in policy rates by the RBI period after period, said Mr. Jaipuria

IIP growth has been estimated at -1.9% in February 2014 and cumulative - 0.1% for the period April-February 2013-14 which is decelerating year after year 0.8% in FY2012-13, 6.7% in FY2011-12 and 8.5% in FY2010-11, said Mr. Jaipuria

Keeping the interest rates high to solve the structural supply side constraints has increased the economic vulnerabilities as the industrial growth is decelerating year after year but the risks to high inflation still exists.

Though the interest rates during the last three years have been remained in the higher trajectory, there is little respite to inflation vis-à-vis structural supply side constraints in the economy, he added

CPI inflation, which is becoming benchmark for RBI’s policy stance on inflation, still exists more than 8% for the month of February 2014.

This indicates that solution is somewhere else and that demands a resolution in the agriculture productivity, supply side agri- infrastructure vis-à-vis public investments in agriculture sector and delivery of food mechanism.

We urge the Government to take effective measures to improve supply side constraints in the economy. Farm sector needed to be focused seriously in the coming times to resolve the structural problem of inflation and to enable economy to attain its potential growth rate trajectory, said Mr. Jaipuria

Going ahead, we expect a calibrated policy stance in the coming times that should consider revival of economic growth trajectory along with containing inflationary scenario, said Mr. Jaipuria.
End.