average of 3. 4 % in 2023 to 2. 7 % in 2024, 1. 9 % in 2025 and 1. 7 % in 2026. underlying inflation, which in 2023 stood at 4. 1 % in annual average terms, will decline to 2. 2 % in 2024 before falling slightly further over the following two years. the risks to these projections are on the downside as regards activity and are considered to be balanced with respect to inflation. the main source of risk continues to be global geopolitical uncertainty and, in particular, a potential escalation in the ongoing conflicts in ukraine and the middle east. as regards the latter, the flare - up of tensions in the red sea region over the last few months has triggered a sharp increase in shipping costs, coupled with the risk of a possible escalation of the iran - israel conflict. the impact of the cumulative monetary tightening on activity and prices is another significant source of uncertainty. the weakness of economic activity observed in the euro area in recent quarters – more pronounced than expected – could indicate a somewhat stronger transmission of monetary policy than envisaged. also pointing in this direction are the downward surprises in lending to the private sector, of which there have been several in the last few quarters. in addition, the reactivation and reform of the european fiscal rules poses a risk to the baseline scenario of these projections, which could prove significant for the spanish economy, given its high public debt and structural deficit levels. compliance with these rules will require the design and implementation of a medium - term fiscal consolidation plan that allows for a more pronounced correction of the structural public deficit than envisaged in the banco de espana's projections. although the economic impact of this adjustment plan remains uncertain, and will crucially depend on how it is designed, its implementation would likely result in slower economic momentum over the projection horizon. this impact could be lessened if the adjustment went hand in hand with ambitious structural reforms. other significant sources of uncertainty surrounding the baseline scenario of these projections can be found closer to home and relate to potential second - round effects on inflation. first, a larger than expected increase in wages and / or profit margins would entail a higher inflationary path than envisaged under the baseline scenario of these projections. although no signs of feedback loops between prices and wages and / or profit margins have been observed so far, it is important to continue monitoring this situation. this is particularly relevant in a setting in which compensation per

non - financial assets such as housing and gold. the important reform of flexible inflation targeting, helped by low oil prices and food supply management, has kept the headline inflation under control during the last 5 years, relative to the mpc ’ s mandated target ( chart 9 ). this way, two preconditions of macroeconomic stability – – stable growth and low inflation – – necessary for financialisation of savings and capital market development are now in place in india. chart 8 : trends in gdp growth in india note : gdp at constant prices with base year 2011 - 12 source : database of indian economy ( dbie ), reserve bank of india 2018 - 19 2017 - 18 2016 - 17 2015 - 16 2014 - 15 2013 - 14 2012 - 13 2011 - 12 2010 - 11 2009 - 10 2008 - 09 2007 - 08 6. 8 % 2006 - 07 2005 - 06 9. 00 % 7. 9 % 8. 00 % 7. 00 % 6. 00 % 5. 00 % 4. 00 % 3. 00 % 2. 00 % 1. 00 % 0. 00 % [ value ] % apr / 19 oct / 18 apr / 18 oct / 17 apr / 17 oct / 16 apr / 16 oct / 15 apr / 15 oct / 14 apr / 14 oct / 13 apr / 13 oct / 12 apr / 12 oct / 11 apr / 11 oct / 10 apr / 10 oct / 09 apr / 09 oct / 08 [ value ] % apr / 08 oct / 07 18. 0 16. 0 14. 0 12. 0 10. 0 8. 0 6. 6 % 6. 0 4. 0 2. 0 apr / 07 percent chart 9 : trends in inflation in india note : data till apr - 14 is based on industrial worker - general index with base year 2001 and thereafter new cpi - combined with 2012 as base year source : database of indian economy ( dbie ), reserve bank of india 3. 1. 2 promoting market autonomy a. rationalising regulatory guidelines and procedures in active coordination with the government and other financial market regulators, the reserve bank has undertaken a series of reforms and rationalisation of existing policies. these measures also seek to ensure financial stability and instil confidence among stakeholders. some important examples include : ( i ) liberalising the process for innovation of new products ; ( ii ) moving away from a prescriptive approach to a principle - based regulatory approach ; ( iii ) minimising interference in the market process by eschewing ad