Expressing concerns over deceleration in industrial output for August, India Inc on Tuesday demanded that Reserve Bank should not increase policy rates any further as it will hurt the recovery process.

“… the RBI should not raise policy rates any further as it could have a negative impact on consumer demand as well as corporate investment and thereby slow down in economic growth,” CII said in a statement.

Industrial production growth rate nearly halved to 5.6 per cent in August from a year ago.

RBI has hiked key short-term lending (repo) and borrowing (reverse repo) rates five times this year.

At present, the repo and reverse repo rates are at 6 per cent and 5 per cent, respectively.

The apex bank is scheduled to announce its mid-term policy review on 2nd November.

Ficci too said any further hike in interest rates could impact consumer durables and automotive sector.

“Negative growth in key sectors like capital goods, apparels … is indeed a cause of concern and with appreciation in rupee and hardening of interest rates, the growth of manufacturing sector may be significantly affected,” Ficci Secretary General Amit Mitra said.

Assocham President Swati Piramal expressed apprehensions over the nature of industrial recovery that the country has been witnessing.

“The implications of falling industrial production will pull down the services sector as most of its products are intermediate in nature and the combined effect on employment poses a grave concern to the economy,” she said.