'Lower interest rates can control inflation'

{image-inflation+rbi_07042008.jpg news.oneindia.in}New Delhi, Apr 7: CII President Sunil Bharti Mittal today said lowering of interest can help boost the supply side to tame the inflation that touched a three year high at seven per cent. ''The real problem lay in the supply side which needs to be strengthened to control the inflation. Lowering of interest rates is necessary so as to facilitate setting up of more industries subsequently increasing production,'' he said.

Mr Mittal said, ''There are meetings going on and the government has made some policy decisions. In the coming days, we will see some more policy interventions for it.'' A study by industry body CII notes that the economy is currently facing twin problems of an emerging slowdown and moderately high rate of inflation especially in food grains, basic metals, metals and metal products.

The Index of Industrial Production (IIP), which has moderated during the first 11 months of the current fiscal, is expected to further decline in terms of growth to end the year with lower growth of industrial production, it said.

In this scenario, CII submits that the signalling of the Reserve Bank of India (RBI) on its stance on the monetary policy measures would be of pivotal importance.

The chamber is also of the strong view that restricting demand to manage supply side constraints will not augur well for growth.

The recent fiscal measures to enhance supply of rice and edible oil will be faster than a macro measure such as interest rates, though interest rates are the best tool adopted by central bankers across the world to contain inflation.

UNI