Anti-inflation steps will hurt infra development: Tata

Fiscal measures to rein in inflation could impede the country's infrastructure development due to squeezed investment for want of sufficient credit access, says top industrialist Ratan Tata.

"Fiscal policies to control inflation will affect access to credit and could slow down investment levels as also consumer demand," Tata said in group firm Tata Steel's annual report.

"The most significant impact will, however, be from the slowdown in major infrastructure projects in the areas of road construction, mass transit systems, power generation and investments in primary industries, where financial closure, right-of-way permissions and land acquisition could present major delays," he added.

Drawing country-wide flak, the government has been trying to bring inflation under the "comfort zone" by jacking up policy rates 10 times since March last year, though it continues to be around 9%.

It rose to 9.44% in June on higher prices of fuel and manufactured items from 9.06% in May. Inflation has been continuously hovering above 9% since last December.

The rising interest rates have already started impacting the industry growth. Reeling under a huge deficit of demand, the domestic industry is likely to stage a poor show in their first quarter earnings.

Tata said that the slowdown in infrastructure projects might have a major impact on job creation and the demand for goods and services, resulting in a substantially lower level of economic activity. India is aiming to spend $1 trillion in the next Plan period.

Describing inflation as a "new global challenge", he said it was fuelled by substantial rise in commodity prices, mineral resources and energy which impacted all industrial sectors.

Tata said though the Indian economy had done well in the 2010-11 fiscal, the years ahead could be challenging as the government endeavours to curb inflationary growth.

"Energy costs, reflecting higher prices of crude oil and gas as well as the shortfall in the availability of gas and electrical power will in themselves have a devastating impact on the country's competitiveness and its ability to sustain the high growth rates it enjoyed," Tata said.