Finally, as inflation rises beyond a threshold, it has an adverse impact on overall growth. The Reserve Bank’s technical assessment suggests that the threshold level of inflation for India is in the range of 4 to 6 per cent. If inflation persists beyond this level, it could lower economic growth over the medium-term.
Prospects have improved markedly, and this applies especially to the strongly export-oriented German economy. This is having an immediate positive impact on the conditions in which the financial sector operates. Nevertheless, the road before us is strewn with obstacles. Major challenges for the German banking system still lie ahead.