that may promote “ looting ” behaviour as described by akerlof ( awarded the nobel prize in 2001 ) and romer. they argued that an economic underground can come to life if firms have an incentive to go broke for profit at society ’ s expense ( to loot ) instead of to go for broke ( to gamble on success ). bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations. there is still a large gap arising from our nominal compliance of good corporate governance in accordance with regulatory provisions and real compliance of practicing it in law and spirit. we need to bridge this gap. 5. enforce accountability in all walks of life all the other five steps that i talk of in this address, including real compliance of good governance cannot be achieved unless we enforce accountability. just as we need better governance at every level, we also need to enforce accountability in all walks of life. our accountability structures, especially in public sector, are weak. in administration, the civil bis central bankers ’ speeches servants are insufficiently incentivized for the risks they take, are seldom rewarded for successful completion of their goals and are, at best, merely transferred for poor implementation. mangers in public sector enterprises face similar problems in addition to bureaucratic interventions that delay decisions or require them to move away from policies which may be in the best interests of a public sector unit. it is difficult to enforce accountability in this climate. on corporate accountability, the principal - agent relationship between the management or those who wrest ownership and control and the shareholders as actual owners is rather weak. we have seen asset stripping and bankruptcies in this weak environment. this has been especially true where a complex web of companies within business groups prevail. there is a strong case for simplifying these structures that are often developed to evade taxes, indulge in regulatory arbitrage and to strip assets of the firm for personal use. in recent period, we have come across instances where corporate debt restructuring is sought but ownership commitment of those who have control is rather left weak. we must enforce accountability in such cases by forcing such business entities to bring in more of their capital. there are, sometimes, grave cases of businessmen launching new firms, renaming firms or indulging in m & as to garner fresh public money after they misused funds in the first instance. the concept of the modern firm

suggestions to reinforce india ’ s bop. india ’ s bop evolved reflecting both the changes in our development paradigm and exogenous shocks from time to time. in the 60 year span, 1951 – 52 to 2011 – 12, six events had a lasting impact on our bop : ( i ) the devaluation in 1966 ; ( ii ) first and second oil shocks of 1973 and 1980 ; ( iii ) external payments crisis of 1991 ; ( iv ) the east asian crisis of 1997 ; ( v ) the y2k event of 2000 ; and ( vi ) the global financial crisis of 2008. i will analyse the bop trend in this sequence. the first phase can be considered from the 1950s through mid - 1960s. in the early 1950s, india was reasonably open. for example, in 1951 – 52, merchandise trade, exports plus imports, accounted for 16 per cent of gdp. overall current receipts plus payments were nearly 19 per cent of gdp. subsequently, the share of external sector in india ’ s gdp gradually declined with the inward looking policy of import substitution. moreover, indian export basket comprised mainly traditional items like tea, cotton textile and jute manufactures. not only the scope of world trade expansion in these commodities was less but additionally india had to face competition from new emerging suppliers, such as pakistan in jute manufactures and ceylon and east africa in tea. during this period, policy emphasis was on import saving rather than export promotion, and priority was given to basic goods and capital goods sector. it was argued that investment in heavy industries would bring in saving in foreign exchange, as output from such industries would replace their imports in the long - run. import - substituting strategies were expected to bis central bankers ’ speeches gradually increase export competitiveness through efficiency - gains achieved in the domestic economy. but this did not happen. hence, exports remained modest. in fact our external sector contracted in relation to gdp from the level observed in the early 1950s. by 1965 – 66, merchandise trade was under 8 per cent of gdp and overall current receipts and payments were below 10 per cent of gdp ( table 1 ). notwithstanding the contracting size of the external sector, as imports growth outstripped exports growth, there was persistent current account deficit ( cad ). emphasis on heavy industrialisation in the second five year plan led to a sharp increase in imports. on top of this, the strains of indo - china conflict of 1962, indo - pakistan war of 1965 and severe drought of 1965 – 66 triggered a major bop