Greater use of exchange rate flexibility in emerging countries that have experienced an excessive accumulation of foreign exchange reserves is therefore one factor in the resolution of global imbalances. Moreover, it may contribute to facilitating domestic monetary policy management (decreasing inflationary pressures) and makes it possible to better contain liquidity growth and the risks associated with reserve accumulation and sterilisation. Of course, the gradual implementation of exchange rate flexibility requires that controls on capital flows be lifted at a suitable pace. East Asia experienced this and I am eager to listen to your views on the interaction between financial reforms, institutions and structural or macro-economic policies. To conclude, let me say that, in the liberalisation process in which France and later India have engaged, both may learn from each other since they share similar features and are key players in a globalised world. To this end, cooperation should be strengthened. Cooperation between the RBI and the Banque de France is especially relevant since our two institutions look alike, for instance in terms of diversity in activities, structures (including branches) or staff recruitment for life through competitive examinations. At the financial industry level, more cross-fertilisation should also help. The French financial industry includes some of the largest European banks and insurance companies. Their business models are solid and based on a broad domestic market and best international practices. This enables them to generate strong profitability and develop abroad. But above all, the French financial industry has some specific features that may be valuable for Indian players.

Growth has been good and this has contributed to maintaining demand for working hours. At the same time, demographic developments have been relatively favourable and there have been ample unutilised resources in the economy following the crisis of the 1990s. However, when it comes to the labour supply, there is less reason to be optimistic about future developments. Developments in working hours have been held back during recent periods for structural reasons. The demographic situation, with a declining percentage of the population of working age, will deteriorate significantly in the long term, particularly after 2010. In addition, working hours per person may instead tend to decline in the long run when greater prosperity is taken advantage of to increase leisure time. The assessment in the October Inflation Report is that employment, labour force participation and mean working time will rise during the economic upturn forecast for the coming years and will contribute to an increase in the number of hours worked of approximately 1 per cent a year during the period. In a longer perspective, it is more realistic to assume that the labour supply will not make any contribution to growth. The simulations in, for instance, the Long-term Planning Commission’s most recent report, indicate that the number of hours worked on average will not show any significant change. However, the simulations show that the situation could be improved significantly, at least in the short term, if measures were taken to increase the labour supply.