might also impose greater restraint on consumer spending by reducing homeowners'equity and thus household wealth, and perhaps by affecting consumer confidence as well. because consumption makes up more than two - thirds of aggregate expenditure, any significant effect on consumer spending arising from further weakness in housing would have important implications for the economy. on the other hand, economic growth could rebound more vigorously than now expected. the solid rate of job growth, the decline in the unemployment rate, and the healthy pace of capital investment could be signals that underlying economic fundamentals are stronger than generally recognized. moreover, to date there is little evidence that the weakness in housing markets is spilling over more broadly to consumer spending or aggregate employment. if these trends continue, growth in real activity might return to a pace that could intensify upward pressures on resource utilization. potential output in my remarks today, i have alluded to the economy's underlying productive capacity - in the jargon of economists, " potential output. " the growth rate of potential output is the rate of growth that the economy can sustain in the long run. i will briefly discuss the factors determining potential output and the implications that the growth rate of potential output has for the economy and monetary policy. growth in potential output is determined to a large extent by two factors : the trend growth rates of the labor force ( that is, the number of individuals available to work ) and of labor productivity ( that is, the amount of output that each worker can produce ). with regard to the labor force, research by the board's staff highlights the role of demographic factors in determining the number of people available to work in the years just ahead. most notably, the impending retirement of the baby boomers and the fact that women are no longer increasing their participation in the labor force at the rate they were in the past will tend to restrain the future growth rate of the u. s. labor force. all else being equal, these developments translate into a slower rate of growth of potential output. estimates of the magnitude of the likely slowdown in labor force growth, particularly in the longer run, are subject to significant uncertainty. for example, to a degree that is hard to predict, improved health and increased longevity may increase the interest of older workers in remaining in the labor force, perhaps on a part - time basis, and an increasing scarcity of labor may prompt changes in labor - market institutions and employer behavior that facilitate the participation of older workers. but those adjustments are likely to take time,

of sdls. as far as the arrangements for sharing the corpus of the national small savings fund ( nssf ) are concerned, in accordance with the decision of the national development council, the obligatory share of the states has been reduced to 80 per cent with effect from the year 2007 - 08. loan council the tfc had also recommended that " ….. states, like the centre, must decide their annual borrowing programme within the framework of their respective fiscal responsibility legislations …. the overall limit to their annual borrowings from all sources should be supervised by an independent body like a loan council with representatives from the ministry of finance, planning commission, reserve bank of india and the state governments. the council may, at the beginning of each year, announce the annual borrowing limits for each state, taking into account the sustainability considerations ….. " ( para 15. 7 ). it was, however, felt that setting up of a new institution, like the loan council, would entail additional cost in terms of physical and human resources and would take time. moreover, a large majority of states are currently seized with the task of addressing structural issues in managing government finances which, if carried on to their logical conclusion, could usher in an era of debt sustainability over the medium - term of the tfc period. the loan council could lose its raison d ’ etre once the fiscal situation became tractable, as seems to have been the case with the australian loan council, which provides the international best practice in respect of coordinated borrowings by the federal and state governments. against this backdrop, the technical group felt that the objective of securing coordinated borrowings between the centre and the states on the one hand, and between the states on the other, could be best served by the setting up a standing technical committee ( stc ) with representation from the central government, state governments and the rbi. the terms of reference of the stc are to make annual projections of borrowing requirements of the state governments ; build alternative scenarios and suggest alternative strategies and instruments for raising resources of the states ; advise on a mechanism for annual allocation of market borrowings amongst the states ; take note of actual borrowings of the state governments during the year vis - a - vis the budgeted gfd and develop an appropriate database that would facilitate the monitoring exercise ; assess fiscal risks from issuances of state government guarantees ; and advise state governments on various issues relating to their borrowings. the first meeting of the stc was held during