BANGALORE: Citing stubbornly high inflation, the rising cost of funds and crisis-hit global markets as the main factors responsible for a GDP growth slowdown in the second quarter, Assocham today said the RBI should start cutting interest rates so the cost of credit comes down. The escalating debt crisis in Europe and the shaky economic recovery in the United States are likely to hit the services sector in India, which contributes over 60 per cent of the GDP, the industry body said in a statement. The slowdown in the manufacturing sector -- a major contributor to industrial production -- is also expected to hit services in the third quarter, the Associated Chambers of Commerce and Industry of India (Assocham) said. "The RBI should start cutting bank interest rates so that the cost of credit comes down. Due to near double-digit inflation, the cost of raw materials has shot up, resulting in a slowdown in factories output," said Assocham Secretary General D S Rawat. Unless there is a recovery in the euro zone and the United States, the Indian economy will continue to be impacted, Assocham said.
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