forces that had been restraining the economy during the preceding several quarters. the collapse of final demand that accelerated in the latter part of 2008 left many firms with excessive inventories of unsold goods, which in turn led them to cut production and employment aggressively. this phenomenon was especially evident in the motor vehicle industry, where automakers, a number of whom were facing severe financial pressures, temporarily suspended production at many plants. by the middle of this year, however, for more discussion, see ben s. bernanke ( 2009 ), “ on the outlook for the economy and policy ”, speech delivered at the economic club of new york, new york, n. y., november 16. inventories had been sufficiently reduced to encourage firms in a wide range of industries to begin increasing output again, contributing to the recent upturn in the nation ’ s gross domestic product ( gdp ). 2 although the working down of inventories has encouraged production, a sustainable recovery requires renewed growth in final sales. it is encouraging that we have begun to see some evidence of stronger demand for homes and consumer goods and services. in the housing sector, sales of new and existing homes have moved up appreciably over the course of this year, and prices have firmed a bit. meanwhile, the inventory of unsold new homes has been shrinking. reflecting these developments, homebuilders have somewhat increased the rate of new construction – a marked change from the steep declines that have characterized the past few years. consumer spending also has been rising since midyear. part of this increase reflected a temporary surge in auto purchases that resulted from the “ cash for clunkers ” program, but spending in categories other than motor vehicles has increased as well. in the business sector, outlays for new equipment and software are showing tentative signs of stabilizing, and improving economic conditions abroad have buoyed the demand for u. s. exports. though we have begun to see some improvement in economic activity, we still have some way to go before we can be assured that the recovery will be self - sustaining. also at issue is whether the recovery will be strong enough to create the large number of jobs that will be needed to materially bring down the unemployment rate. economic forecasts are subject to great uncertainty, but my best guess at this point is that we will continue to see modest economic growth next year – sufficient to bring down the unemployment rate, but at a pace slower than we would like. a

duvvuri subbarao : frontier issues on the global agenda – need for global cooperation inaugural address by dr duvvuri subbarao, governor of the reserve bank of india, at the indian council for research on international economic relations / inwent / german development institute ( icrier / inwent / die ) conference on “ policies for growth and financial stability beyond the crisis – the scope for global cooperation ”, mumbai, 27 october 2010. * * * 1. first of all, my thanks to the organizers of this conference – icrier, the german development institute ( die ) and inwent – for inviting me to inaugurate this conference on : “ policies for growth and financial stability beyond the crisis – the scope for global cooperation ”. having just returned from a meeting of g - 20 finance ministers and central bank governors in korea over this weekend, i am deeply sensitive to the value of generating a wider debate on issues that the world has to grapple with as we emerge out of the crisis. 2. the focus of this conference on global cooperation is particularly relevant. everyone now has her / his list of lessons of the crisis, and one item common on almost every list is the lesson that today ’ s macroeconomic problems cannot be resolved without global cooperation. the crisis has taught us that no country can be an island and that economic and financial disruptions anywhere cause ripples, if not waves, everywhere. the crisis also taught us that given the deepening integration of countries into the global economic and financial system, uncoordinated responses will lead to worse outcomes for everyone. 3. when the history of this crisis is written, the london g - 20 summit in april 2009 will be seen as a clear turning point when the leaders of the world showed extraordinary determination and unity of purpose in combating the deepest economic crisis of our generation. sure there were differences, but they were debated and discussed and compromises were made without eroding the end goal – that is to end the crisis. 4. the priority task today is to calibrate the exit from the crisis driven accommodative policies and put the world on a sustainable growth path. global cooperation is as vital for managing this recovery as it was for managing the crisis. there is a growing apprehension though that the vaunted unity that the g - 20 had shown during the crisis is dissipating and that its resolve to foster globally optimal solutions is weakening. when all the details