ratio, the need is to encourage non - debt creating flows and discourage excessive debt creating flows. finding funding sources other than the us and european banks is also a major challenge. perhaps one of the most daunting challenges for india is to attract capital given the risk - off sentiment prevailing in the global markets and low investment and growth outlook in the country. improving the investment climate in india has to be the priority area of focus both to retain the interest of indian corporates in the country and attract foreign direct investment flows. this could perhaps be addressed by focusing on what can be called as deficits of the 7ls – land, linkages, labour, legal, liquidity, leadership and learning deficits. let me spend sometime to briefly explain these seven deficits. land : due to lack of clarity on land titles, incomplete land records, absence of their digitalization and weaknesses in the laws relating to land acquisition, investors find it difficult to acquire the required land. further, given the population density and the type of land use in the country, the problem in land acquisition gets further aggravated due to social, cultural bis central bankers ’ speeches and political reasons. linkages : the problem of non - availability of land at the right locations is compounded by the lack of required linkages with quality, infrastructure, backward integration with coal and power and other input sources. labour : despite huge unemployment, lack of employable people with right type of skills, inflexibility of the labour laws, growing signs of industrial unrest and rising wage demand have resulted in labour related deficit. in knowledge intensive sectors, which need people trained in hard subjects like science and mathematics and quality engineers, also face problems in hiring required people. legal deficit : difficulty in enforcing contracts in a timely manner, absence of proper liquidation laws, absence of reforms and certainty in tax laws and uncertainty about interpretation of laws, as evident from some recent cases, are legal impediments for investments. need for obtaining multiple regulatory approvals, which is reflected in very low global position of india in “ doing business ranking ”, compounds the problems of the entrepreneurs. liquidity : at the system level, crowding out of resources from the banks due to huge government borrowings because of large fiscal deficit pre - empts resources for private sector investment. in the current context of declining asset quality and loan - deposit mismatches, banks are found to be risk averse in lending for private investment. absence of a vibrant corporate debt market and the

terms of approval for large projects, reducing high gfd which crowds out resources available to the private sector and adds to the inflationary pressure and quality spending by the governments to crowd in investment could go a long way in bringing out positive reassessment of the country by the cras. bis central bankers ’ speeches concluding thoughts in conclusion, allow me to summarize the issues i have highlighted. global growth has slowed and uncertainties have increased. unemployment remains high in the advanced economies leading to lower demand. the indian economy and the financial system have a unique set of strengths and weaknesses but like any other ede it cannot fully protect itself from the global headwinds. its resilience to overseas developments would be severely tested as domestic growth and inflation dynamics are affected by both global factors and local factors. global factors affect the domestic economy through the 7c channels – commerce, commodity price, capital flows, currency rates, contamination, confidence and credit rating channels. the local factors, such as, the twin deficits of gfd and cad, persistently high levels of inflation, deceleration in investments, infrastructural deficiencies, supply bottlenecks of industrial inputs like coal and electricity, deficient monsoon, hassles involved in execution of large projects, low business confidence and governance issues play an equally dominant role in toning down the growth expectations. from the global perspective, the major challenges facing india that need to be addressed are the falling demand for indian exports and inelastic nature of our imports, mostly commodities with elevated prices, controlling inflation and inflation expectations, eliminating infrastructure bottlenecks, attracting non - debt creating foreign capital in the face of general risk aversion, containing knock - on effects of overseas developments on the exchange rate, encouraging firms to follow sound risk management practices to contain the impact of their foreign exchange exposures and taking measures to positively influence the assessment of the credit rating agencies. in the context of current global environment characterized by slowdown and uncertainty on which we have little control, there are still leeways available for improving the domestic economy and the investor sentiments. the need of the hour is, therefore, to address the structural and cyclical impediments through appropriate domestic macro and micro - economic policies, credible action for fiscal consolidation, tax reforms and predictability and controlling inflation and inflationary expectations. there is also need to tone up our political – administrative – regulatory framework for improving our “ doing business ranking ” given the fact