mr. reddy reports on the recent performance of the indian economy speech by dr. y. v. reddy, a deputy governor of the reserve bank of india, entitled, “ managing capital account ” in hyderabad on 01 / 10 / 98. on behalf of the reserve bank of india, i would like to convey my warm greetings to all the delegates from various south asian countries. i have special pleasure in welcoming our chief guest, governor a. s. jayawardhene. the forex markets in many parts of the world are going through a turmoil due to currency crises, which are intensively affecting more and more countries. many of these crises are characterized by volatile capital flows – though the underlying causes for such crises may vary. currently, there is a raging debate on the issues relating to managing capital flows, incidentally reopening many issues such as the merits of capital controls, and the adequacy of the international financial architecture. there are references to india also in this debate and interest has been expressed on how we are managing our capital flows. i will, therefore, share with you our perceptions on the following issues. first, why is it that india has remained relatively unaffected by the asian crisis? second, what role did policy relating to capital flows play in imparting stability? to put it differently, what was the policy and operational framework in managing capital flows? how was the current account handled to ensure effective management of the capital account? what were the strategies for crisis avoidance? what were the means adopted to meet extraordinary situations? third, in view of emerging global developments, can india continue to be what has been described as an island of tranquility amidst a sea of turbulence in the emerging economies? to put it differently, what are the immediate prospects for india in the external sector? india and asian crisis the performance of the indian economy, by all accounts, has been by and large impressive both in terms of growth and stability. during the period 1992 - 97, the annual average real gdp growth rate was 6. 8 per cent. our annual average growth rate during this period was higher than the developing countries ’ average at 6. 4 per cent. our inflation during the period 1992 - 97 was 8. 7 per cent, which compares favourably with the developing countries ’ average. our current account deficit as a percentage of gdp was only 1. 3 per cent during this period. foreign exchange reserves went up from us $ 9. 2 billion in 1991 - 92 to us

the population. unfortunately, even while inequality between countries is diminishing today, inequality within countries is increasing. today, even well - run market economies seem to be favouring those who already have plenty. in part, this is because skills and capabilities have become much more important in well - paid jobs, and those born in good circumstances have a much better chance at acquiring these. the winner - take - all nature of many occupations, where a few of the most capable entrepreneurs and the best workers take most of the income ( think apps, architecture or acting, for example ) accentuates the value of early childhood preparation ; and hence the benefit of being born to the right parents in the right community. income inequality is on the rise, with some having colossal incomes and others worrying about the next meal. what can we all do to restore faith in markets? we have to work to provide effective access to schooling and healthcare for all, a non - discriminating job market with many jobs, equal opportunities for further advancement regardless of gender, race or background. all this will increase the perceived legitimacy of wealth and society ’ s willingness to broaden the areas where it is spent. thoughtful philanthropy, as reflected in the founding of this school, can bis central bankers ’ speeches further help enhance society ’ s acceptance of great wealth. finally, as you embark on careers that are likely to be very successful, you should earn by creating perceptible value and, equally, spend to create value. not only will your work be more enjoyable, but you will strengthen the economic freedoms we sometimes take for granted. let me turn briefly to my point about private education. private education across the world is expensive, especially in high - quality research universities, and getting more expensive all the time. that is because the critical resource, good professors, is in short supply. two solutions are proposed. one is technology. why not have the best professors beam lectures at thousands of students over the net? the problem is that while such classes seem theoretically attractive, completion rates are abysmal. we do not finish such courses perhaps for the same reason we do not simply take a course syllabus and read the recommended books in the library – there are too many distractions in life for us to complete without other forms of compulsion. online courses still need to figure out, not just how to get student commitment, but also how to provide the learning support that a university community and environment offers. a second solution is to di