Don’t miss the latest developments in business and finance.

Rise in asset prices a concern, says RBI

Image
Press Trust of India Mumbai
Last Updated : Jan 20 2013 | 1:11 AM IST

The Reserve Bank of India (RBI) today expressed concern over rise in asset prices, but said it will have limited implication for overall inflation.

"A greater pace of rise in asset prices continued to remain a concern from the stand-point of macroeconomic management, notwithstanding some moderation in Q4 2009-10... their implications for the inflationary process, have, however, remained contained," RBI said in its annual report for 2009-10 released today.

Higher asset prices generally tend to fuel the demand pressure in the economy and thus, contribute to inflationary pressures. There was a sharp increase in asset prices, particularly equity prices, on the back of a strong domestic (economic) recovery along with resumption of FII inflows and ample market liquidity, the apex bank maintained.

Stock prices displayed a continuous upward momentum throughout the year except for some occasional corrections caused by global financial market shocks stemming from the Dubai World default and Greek sovereign debt crisis, it said.

Housing prices witnessed a correction during the global financial crisis, but there was a sharp rebound in the subsequent period, the RBI said.

"During the phase of economic recovery, a sharp increase in equity prices helped in improving the investment climate and enabled corporates to raise funds through IPOs and private placements," the apex bank observed.

Also Read

First Published: Aug 24 2010 | 8:36 PM IST

Next Story