its output from the same number of establishments, the average size of which has presumably increased and, most significantly, from virtually the same number of workers. this, of course, means that the average productivity of those workers who had or were able to get jobs in organized manufacturing went up dramatically. chart 6 displays this trend through the series “ value added / worker ”. significantly, total earnings per worker ( emoluments / worker ) behaved more or less commensurately with productivity. what is particularly important about the pattern on this slide, however, is the differential between “ wages ” – which reflect the fixed component of earnings – and “ emoluments, which combines the fixed and variable components. the increasing proportion of the variable component in total earnings per worker indicates that the sector as a whole is beginning to build a welcome degree of flexibility into its employment contracts. i will return to this issue in the concluding section. finally, the rather worrying long - term impression of exclusion becomes somewhat less so if we look at more recent trends in the absolute numbers of both factories and workers. from chart 7, it is apparent that organized manufacturing activity has experienced a revival in the number of factories during the recent growth boom. even more reassuring is the picture in chart 8, which suggests that this has been matched by a revival in employment levels. i believe that the increasing flexibility in wage contracts that was seen in chart 6 has something to do with this revival. wage flexibility allows both the downside and upside of the business cycle to be shared between the employee and the employer. to that extent, it makes hiring people more attractive, which is, after all, the ultimate goal. the components of a strategy i have spoken about a simple principle and some simple arithmetic. i will now turn to the more complicated part of the problem, viz., how to translate the principle and the arithmetic into outcomes. not that this is rocket science ; as i said earlier, every country that has preceded us has achieved it. here again, i risk treading over some well - known ground, but given both the magnitude of the challenge and the potential to become the factory to the world, i believe that this is a set of arguments that bears repeating. three elements need to come together to achieve the transition in employment that is central to the achievement of rapid and inclusive growth. the first is the degree of flexibility in the employment contract. the evidence presented in the previous section suggests that setting up new manufacturing establishments and hiring more

the importance of dissemination of credit information, the rbi requires banks / dfis to obtain the consent of all their borrowers - not only defaulters - for dissemination of credit information to enable credit information bureau of india ltd., to compile and disseminate comprehensive credit information. preserving the integrity of the banking system prevention of frauds and implementation of anti money laundering ( aml ) measures are two important aspects of the efforts being made to prevent criminal misuse of the financial system which threaten the stability of financial transactions worldwide. supervisory initiatives keeping in view the emerging scenario under the basel ii accord and the need to use supervisory resources more productively, a beginning towards risk - based supervision ( rbs ) of banks has been made. on the basis of experience gained this will be extended to the entire banking system and will become an essential aspect of pillar 2 compliance. risk management systems i would now like to flag a few issues - some of which are purely exploratory and are raised for debate rather than as a statement of the official stance. as you are all aware, we are positioned at a crucial juncture because the current phase will be the time when risk management skills of financial entities will be put to test. the liquidity overhang in the system coupled with the past downward movement of interest rates seems to have spurred a sense of complacency oblivious of the downside risks of an adverse interest rate movement. it is also apprehended that this attitude has led some banks to dilute their approach to credit risk. the building of the risk elements into the pricing of the credit facilities is reportedly taking a backseat in the pursuit of asset expansion. this may leave banks in a situation where some of the players are not only less prepared to face the reversal of interest rate movement, but are also left with a badly priced portfolio in relation to the credit quality. i would like this aspect to be appreciated not so much as a note of alarm but as a voice of prudence. credit growth should be carefully calibrated with risk measurement and should not be merely seen as deployment of funds at marginal costs in the background of sluggish growth. banks should look ahead at the expansion of credit portfolio in a healthy way, particularly in the background of higher industrial growth, new plans of corporate expansion and higher levels of infrastructure financing. coupled with this are the regulatory requirements of management of market risks, which are becoming increasingly relevant. as we are all well aware, the adverse effects of risk