Inflation, rising cost of funds and crisis-hit capital markets responsible for slowdown in Q2 GDP - ASSOCHAM

Industry body ASSOCHAM said stubbornly high inflation, rising cost of funds and crisis-hit global capital markets were largely responsible for the slowdown in GDP during second quarter of 2011-12.

The escalating debt crisis in Europe and nervous economic recovery in the United States are likely to hit the services sector in India, which contributes to over 60 per cent of the GDP. Even the faltering manufacturing sector – which is a major contributor to industrial production – is expected to hit the services in third quarter, said The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

"The RBI should start cutting bank interest rates so that cost of credit comes down. Due to near double digit inflation, the cost of raw materials have shot up resulting in slowdown in factories output," said secretary general D.S. Rawat.

Unless there is recovery in the Eurozone and the United States, the Indian economy will continue to be impacted. "The government should fast-track National Manufacturing Policy and take measures to attract massive investments so that GDP growth does not fall below 7.5 per cent in current fiscal year," he said.

Source : Equity Bulls

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