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Updated: January 18, 2011 22:06 IST

‘Interest rate hike can impact growth'

Special Correspondent
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Anand Sharma. File photo
The Hindu Anand Sharma. File photo

Union Commerce and Industry Minister Anand Sharma on Tuesday said that any move to raise the cost of borrowing to rein in inflation could impact growth and cautioned that interest rate hike might not be a suitable tool to control rising inflation.

In a letter to Finance Minister Pranab Mukherjee, a week ahead of the Reserve Bank of India set to review the monetary policy, the Commerce and Industry Minister said industrial growth had already plunged to an 18-month low of 2.7 per cent in November 2010. “The high inflation in primary articles, particularly vegetables, is more on account of supply side constraints and monetary policy may not be the most suitable intervention to deal with the situation,'' he added.

While appreciating the concerns on the inflation front, Mr. Sharma said: “the industrial sector clearly needs sustained support to enable complete recovery.''

He said the capacity addition had not been at an appropriate level to ensure the sustained targeted growth in gross domestic product.

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