Softening Prices Will Support Growth: RBI

India must sustain structural reforms to boost growth potential

- Shayan Ghosh

India is poised to sustain its growth momentum in the current fiscal year, aided by easing price pressures, although risks emanating from sluggish expansion of other economies could pose risks, the Reserve Bank of India (RBI) said in its annual report on Tuesday.

The central bank attributed its optimism to strong macroeconomic policies, softer commodity prices, a robust financial sector, a healthy corporate sector, and the continued thrust on the quality of government expenditure in the fiscal policy. However, it counts slowing global growth, long-drawn geopolitical tensions and a possible rise in financial market volatility as risks.

“It is important, therefore, to sustain structural reforms to improve India’s medium-term growth potential," RBI said.

India’s banking regulator believes that the recent financial sector turmoil in the US and Europe requires a reassessment of risks to the financial stability and resilience of financial institutions during monetary policy tightening.

While Indian banks and non-banking financial intermediaries remain sound and resilient, they need to stress-test for these new shocks, it said.