Expressing his point, Harsh Pati Singhania, senior vice president of the Federation of Indian Chambers of Commerce and Industry, said, “We are already in a downward phase. The current rate hike will add to that burden.”

Experts also said that in spite of a series of interest rate hikes in 2007-08, the prospects of robust growth and a wide market base had propelled companies to enhance capacities and take the investment rate in the country to an all-time high 31.9 per cent of GDP. But now, a question mark hangs loosely over the growth pattern of the country and few companies would be willing to risk new investments at these higher interest rates.

Experts also point out at the effect on other areas. Yashika Singh at Dun & Bradstreet India, said, "The RBI’s decision is likely to hit the demand in the interest sensitive sectors, particularly, automobiles, consumer goods and real estate. Along with the rising cost of investible funds, it could adversely affect capacity expansion plans."