Concerned over decline in manufacturing sector, India Inc today stepped-up its demand for cut in interest rates by the Reserve Bank to spur growth.
"The problem of inflation is primarily due to food items ...There is a strong case for RBI to cut down interest rates further at least by another 50 basis points immediately," industry body Ficci said.
The RBI will unveil its mid-quarterly review of monetary policy on September 17.
As per the official data released today, the Index of Industrial Production (IIP) for July showed a dismal growth of 0.1 per cent compared with 3.7 per cent over the same period a year ago because of poor show by manufacturing, mining and capital goods sector.
"The positive 0.1 per cent growth in IIP is insignificant since both the capital and intermediate goods category are in negative territory. The negative growth in capital goods will have lag effect implying that industrial growth will remain subdued in coming months," Ficci President R V Kanoria said.
Kanoria said fiscal deficit remains an area of concern and is a major factor leading to weak investment climate in the country and low business sentiments.
This is even lower than expectations. While monetary intervention in the form of repo rate cut has been due for a while, the economy is in need of sentiment boosters. Investments have dried up, which are evident from the performance of the capital goods sector, CII said in a statement.