room for more accommodation. ” nothing i say in what follows is meant to offer further guidance, and please don ’ t read veiled meaning where none is intended. if we look around the world today, it does not present a pretty picture. industrial countries are still struggling, with a few exceptions, to grow. our fellow brics all have deep problems. indeed, india appears to be an island of relative calm in an ocean of turmoil. what is different and how can we be assured that it will continue? a lesson from brazil? perhaps brazil offers a salutary lesson. only a few years ago, the world was applauding the country ’ s thriving democracy, its robust economic growth, and the enormous strides it was making in reducing inequality. it grew at 7. 6 percent in 2010, and had discovered huge oil reserves which the then president lula likened to “ winning a lottery ticket ”. yet the country is expected to shrink by 3 percent this year, and its debt just got downgraded to junk. what went wrong? paradoxical as it may seem, brazil tried to grow too fast. the 7. 6 percent growth came on the back of substantial stimulus after the global financial crisis. in an attempt to keep growth high, the new york times says the central bank was pressed to reduce interest rates, fuelling a credit spree that overburdened customers are now struggling to repay. 1 further, brazil ’ s government funded development bank hugely increased subsidized loans to corporations. certain industries were favored with tax breaks while price controls were imposed on gasoline and electricity, causing huge losses in public sector firms. petrobras, the national oil company, which was supposed to make enormous investments in oil drilling, instead became embroiled in a corruption scandal. even as government pensions burned an ever larger hole, budget deficits expanded, and the political consensus to narrow them has become elusive. towards sustainable growth while the brazilian authorities are working hard to rectify the situation, let us not ignore the lessons their experience suggests. growth has to be obtained in the right way. it is possible to grow too fast with substantial stimulus, as we did in 2010 and 2011, only to pay the price in higher inflation, higher deficits, and lower growth in 2013 and 2014. of course, india is not in the same situation today. but with the world being an inhospitable place, we have to work hard to strengthen our current recovery and put it

and were generally averse to lending for the long term. the risk aversion of banks primarily stemmed from the repayment of project loans being contingent upon performance of the project and cash flows arising from it over a long period of time. the project could go wrong for a variety of reasons like technological obsolescence, market competition, change of government policies, natural calamities, poor management skills, poor infrastructure, etc. naturally, the risk premium on the long gestation projects was substantially higher which not only resulted in creating a scarcity of finance for the long term projects, but also raised the finance cost thereby rendering the project financially unviable. it was precisely to overcome the twin problems of scarcity and high - cost of finance for the long term projects that the dfis were established almost exclusively under government ownership. importantly, these institutions were also expected to develop requisite expertise on project appraisal and risk management in long term lending and complement private financial lending entities. genesis of development finance institutions 8. as i mentioned earlier, the dfis were mostly established as special financial institutions for promoting and supporting national economic development agenda. they have, indeed, played a catalytic role in the socio - economic development across the globe. in europe, the advent of development finance can be traced back to the mid - nineteenth century when these institutions were established primarily to meet the increased demand for medium to longterm capital by new and emerging enterprises during the industrial revolution. in france, long term finance institutions were set up in the late 1840s for giving impetus to the industrial and infrastructural development. in the developed economies, dfis were also established because of external developments like war, etc. dfis in continental europe, in fact, played a major role in reconstruction of the war - ravaged economies. 9. in the post - colonial era, the emerging economies faced the challenge of evolving an appropriate mechanism for channelizing resources into the development effort. many of them had inherited capital starved, primitive financial systems. such systems could not be relied upon to allocate resources among competing demands in the economy. the task of institution building was too important to be left to the mercy of the market forces, which themselves were at a nascent stage of development. besides, the markets and traditional financial institutions were generally averse to lending for the long - term as such lending would be characterized by uncertain outcomes. facing such a scenario, several governments in europe and east asia decided to