the current juncture could be suboptimal. post - crisis learning do suggest that to achieve public policy objective of ensuring growth, price stability and financial stability, co - ordination between monetary policy, fiscal policy and sovereign debt management is critical. there is inherent synergy of monetary policy and sovereign debt management strategy and if they operations remain with the central bank. there is, thus, a strong view that the present arrangements for debt management by the central bank in co - ordination with the government need not be discontinued, especially when the fiscal deficit remains elevated warranting large market borrowings without disrupting financial market stability. 14. the may 22, 2013 talk of tapering by the federal reserve had led to turbulence in the external conditions and it spilled into the domestic debt market. the reserve bank of india had to increase the short - term rates in order to contain volatility in the foreign exchange market. the overnight call rate increased from 7. 21 per cent on july 15, 2013 to 13. 46 per cent on september 7, 2013. the hardening of the short - term interest rates got transmitted to medium and long - term yields eventually. the 10 year g - sec yield, for instance, increased from 7. 60 per cent as on july 15, 2013 to 9. 27 per cent as on august 2013 ( chart 2 ). 15. besides steep rise in yields that was largely attributed to liquidity tightening, the volatility in bond yield market heightened and this led to reduced demand for g - sec. thus, heightened volatility became a worrisome factor for debt managers who in such situations could be forced to issue debt which may not be in alignment with the optimal debt structure and thus, the same may aggravate various risk parameters. in this context, it may be pertinent to underline that volatility in g - sec market has subsided significantly after the reserve bank announced reversal of temporary policy measures starting september 20, 2013. another positive development is that long term foreign investors ’ confidence in the indian currency appears to be increasing lately and this is likely to translate into increased demand for g - sec. i am certain that discussion in the session of “ debt management strategy ” would throw more options for the debt managers to deal with turbulent and fragile market conditions. furthermore, the session on “ saarc country experiences ” would enable participants to know about each other ’ s debt management practices and help in further improving their practices. indian experience shows robust state of the

debt managers in emdes, particularly for those who rely significantly on international capital markets for their government market borrowing. the challenge for debt managers in many emdes was on two counts : first, heightened volatility and uncertainty in the domestic financial markets due to capital flow reversals triggered by deleveraging of foreign investors ; and second, increased exchange rate volatility mostly leading to sharp depreciation of the currency. the countries, which had scope to issue short - term debt due to elongated maturity structure and, at the same time, depended largely on domestic debt, could weather these challenges by issuing larger quantum of short - term debt domestically. on the other hand, the countries having short maturity debt structure were exposed to greater rollover risk. in the above backdrop, one could reasonably argue that optimal debt structure could help debt managers to meet challenges posed by the contagion from the global financial turmoil with less pain. therefore, the debt managers need to pursue the optimal debt structure instead of a suboptimal debt structure guided by the narrow and short - sighted objectives. i am sure that deliberations in the conference would focus in - depth on what should be the optimal debt structure compatible with local conditions. 7. the world economy bounced back from a contraction of around half a per cent in 2009 to an expansion of 5. 2 per cent in 2010. the global recovery was supported by fiscal stimulus measures along with accommodative monetary policy often backed by unconventional policy measures, pursued by various countries. as part of the unconventional measures, some of the countries, such as, the us, the uk and the european union conducted large scale assets purchase programme ( app ) in order to bring normalcy in financial markets and improve the credit flow to the real sectors. these measures resulted in capital flows back to emdes, as net financial flows ( private ), which had declined from us $ 698 billion in 2007 to us $ 282 billion during 2009, increased to us $ 572 billion in 2010. although the us is still continuing with accommodative monetary policy, the net financial bis central bankers ’ speeches flows to emdes declined substantially to us $ 237 billion in 2012. some of the aes are expected to withdraw the accommodative monetary policy and the prolonged period of strong capital flows may come to an end and emdes may face a transition to more volatile external conditions. an example of such volatile external conditions was experienced by emdes in the recent past following