y v reddy : financial globalisation, growth and stability : an indian perspective remarks by dr y v reddy, governor of the reserve bank of india, at the international symposium on “ globalisation, inflation and monetary policy ”, organised by the bank of france, paris, 7 march 2008. * * * chairman nout wellink, governor noyer, distinguished academics and fellow central bankers, i am thankful to the banque de france for giving me this opportunity to participate in the international symposium on " globalisation, inflation and monetary policy ". i will present some of the aspects of the indian experience on the subject and conclude by briefly flagging select issues in the light of recent global developments. financial sector reforms in india, reforms to improve efficiency and soundness of the financial sector started early in the reform cycle that commenced in 1991 – in some ways anticipating the gains that would accrue from the resultant flexibility in product and factor markets. however, the process of strengthening of the functioning of the financial institutions in terms of prudential framework, operational efficiency and regulatory / supervisory regimes has been gradual. it was also calibrated with the development of money, forex, government securities and equity markets. at the same time, the pace and content of reforms in banking, financial and external sectors are closely aligned with the progress in reforms in the real and fiscal sectors and in the public sector as a whole, considering in particular that the banking sector in india is dominated by the public sector. our attempts to align the financial sector with the global best practices do take into account progress achieved in public policy in regard to similar alignments in related areas, especially the real sector flexibilities, fiscal health and overall governance standards. in the indian context, considerable weight is currently accorded by the reserve bank of india ( rbi ) to price and financial stability while recognising its twin objectives of growth and stability. the large segments of the poor tend to reap the benefits of high growth with a time lag while the rise in prices affects them instantly. further, we recognise the limited capacity of the poor to bear risks that may occur in the real sector by virtue of developments in the financial sector, in the absence of social security mechanisms and public safety net. let me illustrate with two examples of emphasis on stability in relation to financial institutions and financial markets. first, the centrality of the banking sector, especially the retail deposit base and credit disbursement, is maintained while gradually expanding the

##3 ), “ sectoral shocks, reallocation, and labor market policies, ” european economic review, vol. 156 ( july ), 104494. - 11 immigrants may have contributed relatively more to u. s. growth because they often integrate more quickly into the labor force, as seen in the right figure. 22 finally, and turning our focus to monetary policy, this stronger economic performance, with falling inflation, has allowed the fomc to be patient about the timing in reducing our policy rate. this performance gave us time to strongly focus on the inflation side of our mandate. and this, together with the bump in inflation early this year, helps explain why we began to ease monetary policy to less - restrictive levels only after other central banks of advanced economies had done so. but now, the combination of significant ongoing progress in reducing inflation and a cooling in the labor market means that the time has come to begin easing monetary policy, and i strongly supported the decision by the fomc in our september meeting to cut the federal funds rate by 50 basis points. looking ahead, while i believe the focus should remain on continuing to bring inflation to 2 percent, i support shifting attention to the maximum - employment side of the fomc ’ s dual mandate as well. the labor market remains resilient, but i support a balanced approach to the fomc ’ s dual mandate so we can continue making progress on inflation while avoiding an undesirable slowdown in employment growth and economic expansion. if progress on inflation continues as i expect, i will support additional cuts in the federal funds rate to move toward a more neutral policy stance over time. still, my approach to any policy decision will continue to be data dependent and to rely on multiple and diverse sources of data to form my view of how the economy is see courtney brell, christian dustmann, and ian preston ( 2020 ), “ the labor market integration of refugee migrants in high - income countries, ” journal of economic perspectives, vol. 34 ( winter ), pp. 94 – 121. - 12 evolving. for instance, i am closely monitoring the economic effects from hurricane helene and from geopolitical events in the middle east, since these could affect the u. s. economic outlook. if downside risks to employment escalate, it may be appropriate to move policy more quickly to a neutral stance. alternatively, if incoming data do not provide confidence that inflation is moving sustainably toward 2 percent, it may