Industry leaders told the government that newer investments are likely to take a hit due to the prevailing high interest rates and falling consumer demand.

While existing investments pipelines are on course, newer projects, which are at conceptual stage, may be affected; companies are concerned that high inflation (the wholesale price index is above 12.6 per cent, a 16-year high) and high interest rates would dampen consumer demand growth, Confederation of Indian Industry President K V Kamath told reporters on August 26 after a meeting of industry leaders with Finance Minister P Chidambaram.

Kamath said Chidambaram impressed upon them to continue with their investment plans.

He added that the finance minister gave the industrialists an overview of what was happening in the economy and tried to boost their confidence by emphasising that the high growth cycle is here to stay for a few years.

"Industry should look at it very positively. Between 8 and 9 per cent GDP growth is here to stay and this is backed by the numbers, particularly the high investment rate," Kamath quoted Chidambaram as saying.

The CII president added that Chidambaram had pointed out that while growth may slow down marginally due to global factors, the situation would reverse. On its part, the confederation has projected a GDP growth 8-8.5 per cent in 2008-09 and said that its earlier estimate of $700 billion investment over the next three years remains intact.

The meeting assumes importance in the backdrop of a slowdown in industrial production.

The interaction allowed the finance minister, who was accompanied by several senior officers of his ministry, including Revenue Secretary PV Bhide and Chief Economic Adviser Arvind Virmani, to gauge the mood of the industrial leaders on key issues like falling consumer demand, funding constraints and the threat of an investment slowdown going forward.

Prodding industry to believe in the sustained cycle of high growth, Chidambaram expressed hope that the CII would come out with responses to the overall outlook on investment and growth, Kamath said.

"The finance minister said industry should believe in the overall growth story and continue to invest. This was critical and imperative for growth of the country as well as industry."