potential benefits of globalisation, india is in a very different position than would have been the case 50 or even 20 years ago. this is because the sources of what economists call “ comparative advantage ” have changed dramatically in india ’ s favour in the 1990s because of the technological revolution. in the old days, comparative advantage was largely determined by “ factor endowments ”, i. e. land, labour and capital. geographical location and early starts in industry also conferred greater advantages. thus, at one time, a country ’ s trade pattern, was determined by its natural resources and the productivity of its land. leaving aside political and institutional factors, a country ’ s level of income was also largely determined by the global demand for its natural resources and its relative efficiency in exploiting them. the importance of land as a source of comparative advantage, however, changed dramatically after the industrial revolution. today, it is almost insignificant. thus, except for the united states, countries accounting for a predominant share of the world gdp have a relatively small share of global land area. after the industrial revolution, the availability of “ capital ” or investible resources became the most dominant source of comparative advantage. at this institute, established by the great prof. p. c. mahalonobis, i hardly need to elaborate on the importance that was attached to domestic capital accumulation in early development economics. in fact, scarcity of capital and low domestic savings were considered to be, and rightly so, as principal causes of a country ’ s underdevelopment. today, availability of capital and productivity are still crucial in determining a country ’ s growth rate. however, there has been a dramatic change in the global mobility of capital, and national boundaries are no longer important determinants of sources and uses of capital. a dramatic illustration of this is the fact that the most developed country in the world, which enjoyed unprecedented growth during the 1990s, is actually a capital - importing country, i. e. the united states. similarly, the fastest growing developing country, i. e. china, is one of the largest recipients of capital from outside. similary, labour is no longer an important element in cost of production and in determining a country ’ s comparative advantage. in most manufacturing industries in the world, it is no higher than 1 / 8th of total costs. in india, it may be somewhat higher because of our domestic laws, but the important fact to note is that india no longer needs to specialise only in

number of essays, writings and chronicles on the global financial crises of 2008. nobel laureate dr. joseph stiglitz also extensively covered these events in various articles which have been compiled and published as a book under the title “ price of inequality ”. in his essay on “ regulation and market failure ”, dr. stiglitz says and i quote “ it is clear that our regulatory structure failed. evidently, there was market failure, but there was also government failure. the primary reason for the government failure was the belief that markets do not fail, that unfettered markets would lead to efficient outcomes, and that government intervention would simply gum up the works. regulators who did not believe in regulation were appointed, with the inevitable outcome that they did not do a very good job of regulating ”. this has, perhaps, been one of the most significant lessons from the financial crisis and is reflected in the fact that there is a global clamour for tightening regulation and supervision of markets and market bis central bankers ’ speeches practices. the evolving regulatory and supervisory initiatives are expected to have a significant positive impact on protection of consumer interests. compensation schemes and redress mechanism 21. the financial services industry must have well articulated and clearly defined compensation schemes that are easy to access, adequate in quantum and effective in implementation. the roles and responsibilities of the consumers and service providers in different situations need to be spelt out up - front. i always believe that to err is human but from an institutions ’ point of view, to confess is divine. if an institution is in the wrong, why should it wait for the consumer to approach it for compensation? would it not be righteous if the bank or financial institution on its own initiates actions to undo the wrong inflicted on customers, some of whom may have not even complained? imagine the impact such an approach would have on the faith and confidence consumers have on the financial system. 22. another important aspect is the existence of a robust, responsive and reliable grievances redress mechanism in the banking / financial services industry, something i have alluded to earlier. the credibility of the banks ’ redressal systems needs to be reinforced by constant follow up by the regulator. the very fact that often bank customers find it safer and simpler to get their grievances resolved by routing them through the regulators or the ombudsman offices is a reflection on the quality and effectiveness of redress mechanism put in place by banks. we have a long way to go to improve the credibility