Rate hike by the Reserve Bank will increase the cost of doing business and impact capital expenditure by India Inc, industry body CII warned on Tuesday.
"The cost of doing business goes up because of the hike and it will impact capex (capital expenditure) by the industry," Confederation of Indian Industry (CII) president and vice-chairman of Bharti Enterprises, Rakesh Bharti Mittal, told reporters here.
He was, however, quick to add that the normal monsoon and supply side measures will have a cooling effect on inflation and help restrict the rate hikes to just the one taken earlier this month.
The industry has also promised a capex of Rs 50,000 crore in the recent months, he said, adding that an uptick in capacity utilisation levels to 80 per cent can prod more industries to join the club.
The RBI may also look at cutting the recently implemented hike and returning to the "benign" rate environment once it sees comfort on the inflation front, he said.
With a focus on its core objective of keeping inflation in a targeted range in the medium term, the central bank had hiked repo rate, or the rate at which it lends to the banks, by 0.25 per cent this month.