"Inflation is a cause of concern for the industry. Although the government has taken some measures to fight inflation, the real problem is in the supply side, which needs to be strengthened," he said.

The lowering of the interest rates at this stage would go a long way in strengthening the supply side in the long term.

"The industry will always want lower interest rate so that it can have more capacity...ultimately it is about demand and supply. To increase the supply we need more investment. So to increase the supply side it is inevitable for the government to lower interest rate in the medium and long term. However, in the short term increase in rate may help to contain inflationary pressure," Mittal, who is also the president of industry body, CII said.

Earlier, CII had opposed any move to increase interest rate by the Reserve Bank to combat inflation, saying that it would result in further fall in industrial production.

"With global economic conditions worsening along with increasing price trend of commodities internationally, any move that will choke investments in the economy will add to the declining IIP (industrial production) and prolong a turnaround," CII had said in a statement.

The inflation rate almost doubled during the three months of 2008 to reach the 39-month high mark of 7 per cent. Although 2008 began with inflation rate of 3.79 per cent for week ended January 5, prices rose as the year progressed.