Notwithstanding measures being taken by the Reserve Bank of India (RBI) to further tighten money supply to control inflation, the government, on Tuesday, assured the industry that its capital requirement for investment in productive sectors would be met.

This assurance was understood to be given by Finance Minister P Chidambaram at a meeting with Chief Executive Officers (CEOs) of leading firms affiliated to Confederation of Indian Industry (CII) here, industry sources said.
The meeting was organised by CII to discuss the prevailing economic scenario and the problem facing the industry in view of high inflation and a tightened money supply situation. 

Mr Chidambaram told the industry leaders that RBI had to pursue tight monetary policy to rein in inflationary expectation. At the same time the RBI has suggested to the banks to make available funds to meet the credit requirement of the industry to fund investment in productive sector, he said.

Investment milieu

To a remark that high cost of borrowing was affecting investment tempo of the industry, Mr Chidambaram said the government would take all necessary steps to improve the “investment environment”, sources said.  During the interaction, the CEOs explained how the increasing borrowing cost in view of high interest rates is impacting the overall performance of their businesses.

Briefing reporters, CII President K V Kamath cautioned that rising interest rates could hurt new investment plans of the industry.

“We do not see any easing of monetary policy as long as high inflation persists,” he said.

Assuring the CEOs that inflation would start moderating in October-November, Mr Chidambaram told the industry leaders that he was confident of the economy posting eight to nine percent growth in the current fiscal.
“The Finance Minister was optimistic of an eight to nine percent growth in the current fiscal,” Mr Kamath said.
“The sluggishness in the industrial growth, Mr Chidambaram told the industry was “marginal” and it could be attributed to a global slump,” Mr Kamath added.