is clear that we are at the beginning of this new phase in the indian banking. the recent measures announced by the government and the reserve bank of india for opening up india ’ s banking sector to international investors will further increase the pressure of competition. at the same time there is renewed emphasis by the government on the social sector together with thrust on rural and agricultural lending. caught between the competitive pressure, both domestic and external, and the politics of development, banks will have to be on their toes, become even more efficient in managing funds and in meeting the needs and demands of customers. economic outlook and banking sector ’ s performance during the last couple of years, global growth has been above the forecast in almost every region stimulated by strong monetary and fiscal measures. the domestic economic outlook is also bright with the real gdp growth rate surpassing 8 % last year and estimated to be around 7 % in the current year. industrial performance also improved considerably with a strong manufacturing growth for the second consecutive year. inflation rate has been under control, barring some hiccup for a short period. aided by a good macro economic environment, banks ’ bottom line has improved significantly over the last three years. however, let us not forget that a major contributor to the windfall gains has been treasury profits fuelled by a secular decline in interest rates during the three years period from 2001 to 2004 and consequent profit booking on sale of government securities. from the current year, with the hardening of interest rates, this trading component of profits is no longer going to shore up banks ’ profitability. on the contrary, most banks have been required to provide for the decline in the market value of their investments portfolio. thankfully, one offsetting factor has been the strong pick up in the credit off - take due to buoyant demand in the economy and revival of industrial activity, which have resulted in substantial increase in banks ’ core interest income. globalisation – a challenge as well as an opportunity currently, the most important factor shaping the world is globalisation. the benefits of globalisation have been well documented and are being increasingly recognised. integration of domestic markets with international financial markets has been facilitated by tremendous advancement in information and communications technology. but, such an environment has also meant that a problem in one country can sometimes adversely impact one or more countries instantaneously, even if they are fundamentally strong. there is a growing realisation that the ability of countries to conduct business across national borders and the ability to cope with the possible

delisle worrell : barbadians have every reason to be confident of our economic future op - ed article by dr delisle worrell, governor of the central bank of barbados, 31 october 2013. * * * barbados is well placed to address the challenging circumstances our economy faces. we have achieved a very high standard of living, the highest among independent caribbean countries in the human development index, and on par with industrial countries. we rank a respectable 47th of 147 countries in the world competitiveness index, and are first among caribbean countries in the index. barbados ’ economic policy making arrangements are superior and our institutions are world class. barbados ’ social and political stability are highly regarded internationally, and the country has good physical infrastructure. how we make policy : the stability of our dollar is foremost in the minds of all barbadians, and the value of the currency is protected by the adequacy of the central bank foreign exchange reserves. every day the minister of finance and top policy makers of the central bank and ministries of finance and economic affairs receive a chart of the foreign exchange reserves, and each month this economic team meets to monitor and discuss the latest developments in the economy and to make adjustments as necessary. the team produces an annual forecast which informs fiscal policy : the budget is designed to match foreign exchange outflows to expected inflows, with a mid - year budget correction, if necessary. the recent budget was a world - class effort, which few democracies have emulated : a steep decline in our reserves became evident only in may this year and by the first week of june cabinet had agreed on the magnitude of the adjustment that would be necessary. a national economic consultation on june 24 secured buy - in from the social partners. this was followed by discussions with all stakeholders and the passage of the august 15 budget, by all accounts fit for purpose, of the right magnitude and with appropriate incentives. for a democratic process, this was a remarkably swift reaction. the growth strategy : the barbados economy is fuelled by foreign exchange. we do four things at internationally competitive prices ( tourism, international business, rum and green energy ) and the foreign exchange we earn and save from these is used to fuel the imports we need for production and consumption. to grow the economy sustainably, we have to grow the foreign exchange earning sectors. fiscal stimulus is not sustainable, because government doesn ’ t earn foreign exchange. growth is led by the private sector, while government provides incentives and faci