RBI calls for more reforms to restore investor confidence

Says monetary policy may focus more on boosting growth after the reform actions get executed

The Reserve Bank of India (RBI) today said recent reforms have reduced the immediate risks for the economy but emphasised on the need for more measures to restore investor confidence.

Flagging concerns about fiscal and external imbalances in the economy, the apex bank said that more reforms are required, especially in road and power sectors, to remove the investment bottlenecks.

"The fresh round of reforms that were initiated in September 2012, after a hiatus, has reduced the immediate risks facing the Indian economy... On the whole it appears that the reform measures taken so far have not decisively lifted business sentiments and further action may be needed to restore confidence," the RBI said in its third quarter review of Macroeconomic and Monetary Development.

The central bank said the monetary policy could focus more on boosting growth after the reform actions get executed.

"While government has embarked on a fiscal adjustment path, staying on this course over the medium-term is necessary for providing sufficient space for monetary policy to stimulate growth," the RBI said.

In the past couple of months the government has taken a host of reforms initiative including opening the multi-brand retail chain to FDI, and also the Union Cabinet has approved hiking foreign investment limits in the insurance and pension sectors.

Earlier this month, the government also allowed partial deregulation of diesel prices, besides limiting the number of subsidised LPG cylinders to nine per family a year.

"Fiscal risks have somewhat moderated in 2012-13, but a sustained commitment to fiscal consolidation is needed to generate monetary space," the RBI said.