The Reserve Bank of India said improved political stability and expectations of a decisive and coordinated policy response augur well for the economy and the markets. RBI, in its ninth half-yearly Financial Stability Report released last evening in Mumbai said the formation of a stable government at the Centre has removed political risk and has led to expectations of better policy coordination and implementation. A strong push to implementing policy is expected to provide the necessary impetus to the investment cycle.The apex bank report cautions that although the general risks that the economy is facing are expected to fall, there could be some deterioration on the current account and fiscal deficit fronts. The growth-inflation dynamics have been adverse for seven of the past eight quarters and the persistent high inflation can alter expectations permanently leading to adverse effects on financial savings, investment and growth.The report further says the efforts to stabilise the economy through monetary policy interventions need to be complemented by appropriate fiscal policy measures.On banking sector, the report says that though the overall asset quality of banks has improved in the recent past with a reduction in bad loans, the systemic risks have increased since December 2013.