According to him, it is imperative now that non monetary measures are rapidly deployed to deal with supply side issues, which continue to contribute to inflationary pressures. At the same time, India continues to import inflation owing to high global prices of commodities including oil. On the supply side, agricultural infrastructure including supply chains need urgent attention, as also storage and refrigeration of fruits, vegetables and staples. In fact, CII would very much urge the government to look at the downside risk that oil prices pose to the economy since more than 70 percent of India’s oil requirements are met by imports and there is very little price elasticity of demand in this area, he said.

CII continues to advocate the urgent approval and implementation of key projects, which could keep the investment demand alive, even as high interest rates in general act as a hurdle in this direction. High domestic interest rates are driving industry to borrow in foreign currency, which could potentially be risky in the event of exchange rate fluctuations, Mr Banerjee pointed out.

CII is apprehensive that banks would be constrained to pass on the increase in repo and reverse repo rate to the customers and this would have a fairly detrimental impact on the economy as a whole and particularly on sectors, where consumer financing plays an important part in demand. CII would urge the RBI to pause and indicate when this tight monetary stance would be eased.