RBI Bats For Structural Reforms; Expects Inflation To Stabilise At 6% In 2015

The Reserve Bank of India (RBI) has said that decrease in inflation and political stability have helped in economic growth. It also said that retail inflation is likely to stabilise at 6% in the next year.

However, it raised flag over the fact that FIIs have been showing a greater interest in the Indian debt markets. The RBI cautioned that this could turn volatile in case of changes in global markets. “If the US surprises investors with changes in its monetary policy, there might be certain adverse impact on domestic markets,” RBI said.

“On the domestic front, macroeconomic vulnerabilities have abated significantly in recent months on the back of improvement in growth outlook, fall in inflation, recovery in external sector and political stability,” the bank regulator said in its Financial Stability Report (FSR).

“The Reserve Bank’s latest projections suggest that CPI inflation over the next 12 months may hover around 6% if international crude prices remain at the current levels and monsoon next year turns out to be normal,” RBI said in its report.

It also expressed concern about restructured assets and called it a “cause of serious concern.” As per the latest data of RBI, stressed assets, including restructured assets and gross non-performing asset, had reached 10.7% in September.