Amid indications of another hike in key policy rates by the RBI in its quarterly review tomorrow, industry body Assocham today said any increase in rates will adversely impact the country's growth momentum.
The Reserve Bank, in its macroeconomic review released today, said that upside risks of inflation have increased and it could endanger the growth objective and also amplify risks to inclusive growth.
"Higher dose of increased key rates by the Reserve Bank may not be the solution. It is time that the monetary policy instances are also supplemented with bold fiscal as well as administrative steps," the chamber said in a statement.
This would also help in improving supply chain bottlenecks and lead to wider participation of farmers and consumers, it said.
The Indian economy grew by 8.9 per cent in the first half of the current fiscal, but inflation remained at a high level of 8.43 per cent in December, led by high food prices.
The food inflation for week ended January 15 was 15.52 per cent after touching a high of 18.32 on December 25, 2010.
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The central bank raised key short-term lending (repo) and borrowing (reverse repo) rates six times in 2010 to tame inflation.
To cool down the higher food prices in the domestic market, Assocham said the government should come out with a National policy to weed out inefficiencies, improve warehousing backward linkages along with amendments in Agriculture Produce Marketing Committee Act.
Besides, the chamber said that the government must speed up reforms in sectors like agriculture and infrastructure.