wage increases to sales prices. i am convinced that, if that happens, a virtuous cycle between an increase in wages for a wide range of employees and a sustainable rise in the inflation rate will start operating fully. before i conclude this part of my speech, i would like to touch on labor productivity once again. while giving you labor - saving investment as an example, i explained that a rise in labor productivity has been exerting downward pressure on prices. however, that only explains part of its impact on prices. i do not intend at all to say that an improvement in labor productivity should be viewed negatively. if the value - added per worker increases along with an improvement in productivity, firms ’ profitability will be enhanced accordingly. from a somewhat longer - term perspective, once firms have additional profits, they will start to consider raising wages in a manner that is consistent with an improvement in productivity. in fact, when analyzing developments in base pay increases in recent years, it can be observed that a rise in labor productivity leads to an acceleration in base pay increases. moreover, if labor productivity of the economy as a whole improves and the long - term economic growth rate rises, business fixed investment and private consumption are likely to be stimulated through rises in growth expectations and permanent income, and prices are expected to rise with the improvement in the output gap. although it would take time, structural policies also will support this path. for example, if labor market reform makes it possible to smoothly reallocate needed staff to firms and industries that face a labor shortage, productivity of the economy as a whole will increase. it is said that there is greater room for improvement in mobility in japan ’ s labor market compared with other major economies, and this implies that the government ’ s initiatives of late — including working - style reforms — are very meaningful. thus, the current labor shortage can be described as having an aspect of the ultimate growth strategy for japan ’ s economy to powerfully urge its structural reform. iii. the bank ’ s conduct of monetary policy so far, i have explained the reasons why prices are not rising as much despite the tightening labor market conditions. in this regard, some of you may ask why the bank is aiming at a rise in prices. rather, it may be natural to believe that lower goods prices are favorable. therefore, in explaining the bank ’ s conduct of monetary policy, i would like to start with the reason why the bank is aiming at a situation in which prices rise in a

hostilities have tested the resilience of every economy in the world, including india. the well - calibrated and co - ordinated monetary and fiscal policies adopted in our country went a long way in shielding our economy from these shocks and helped us emerge even stronger than before. it is a matter of satisfaction that today our gdp growth is robust ; inflation is moderating ; the financial sector is stable ; the external sector remains resilient ; and the forex reserves are at an all - time high. over the years, the reserve bank has emerged as a symbol of stability, resilience, and commitment to the welfare of our citizens. this has been possible due to the 1 / 2 bis - central bankers'speeches contributions made by generations of team rbi. as we move towards rbi @ 100, the reserve bank remains focused on ensuring a stable and strong financial system that would act as a bedrock for our country's economic progress. with these words, let me once again welcome the hon'ble prime minister and the other dignitaries to this commemorative event. i also extend a warm welcome to each one of you in the audience. thank you. namaskar! 2 / 2 bis - central bankers'speeches