Measures to rein in inflation to impede infra development: 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 per cent.

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

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.