The Reserve Bank has warned of risks to growth next year given the muted private investments and weak global demand coupled with geopolitical risks but is optimistic on meeting the Parliament-mandated inflation target of 2-6% this financial year.

 

"The inflation outlook for 2016-17 has improved, but close vigilance is required to achieve the prospects of reaching 4%. Robust consumption brightens the outlook for real gross value added growth in 2016-17, but muted private investment and weak global demand may restrain the pace of growth in 2017-18," the central bank said in the MonetaryPolicy Report ahead of the policy review decision.

 

Daily prices of sensitive items under pulses, fruits, vegetables and cereals suggest that the seasonal surge in food prices may have peaked in July, it said.

 

RBI expressed optimism that the trend may continue given the subdued momentum in food inflation in Q3 and the usual seasonal softening of food prices in early Q4.