extent by the fall in international commodity prices. this is no mean achievement given two successive droughts that would have, in the past, pushed inflation into double digits. despite this success, we hear voices suggesting weakening the fight against inflation. let me reiterate that macroeconomic stability relies immensely on policy credibility, which is the public belief that policy will depart from the charted course only under extreme necessity, and not because of convenience. if every time there is any minor difficulty, we change the goal posts, we signal to the markets that we have bis central bankers ’ speeches no staying power. let me therefore reiterate that we have absolutely no intent of departing from the inflation framework that has been agreed with the government. we look forward to the government amending the rbi act to usher in the monetary policy committee, further strengthening the framework. macroeconomic stability will be the platform on which we will build the growth that will sustain our country for many years to come, no matter what the world does. indeed, i am reminded today of the period 1997 – 2002 when india labored and reformed with only moderate growth, only to see a decade of high growth after that. before i turn to the main body of this talk, a word on interest rates. industrialists grumble about high rates while retirees complain about the low rates they get today on deposits. both overstate their case, though as i have said repeatedly, the way to resolve their differences is to bring cpi inflation steadily down. let me explain, starting with the retiree. the typical letter i get goes, “ i used to get 10 % earlier on a 1 year fixed deposit, now i barely get 8 % ”, please tell banks to pay me more else i won ’ t be able to make ends meet ”. the truth is that the retiree is getting more today but he does not realize it, because he is focusing only on the nominal interest he gets and not on the underlying inflation which has come down even more sharply, from about 10 % to 5. 5 %. to see this, let us indulge in dosa economics. say the pensioner wants to buy dosas and at the beginning of the period, they cost ₹50 per dosa. let us say he has savings of ₹1, 00, 000. he could buy 2, 000 dosas with the money today, but he wants more by investing. at 10 % interest, he gets ₹10, 000 after one year plus

raghuram rajan : financial reforms – past and present text of the c d deshmukh lecture by dr raghuram rajan, governor of the reserve bank of india, at the national council of applied economic research ( ncaer ), new delhi, 29 january 2016. * * * i thank shekhar shah for inviting me to deliver the c. d. deshmukh lecture at ncaer. sir chintaman dwarakanath deshmukh, an ics officer, was truly a giant of modern india. in 1943, he was the first indian, as well as the youngest in its history to date, to be appointed the governor of the reserve bank of india. he subsequently served as the finance minister in the union cabinet. it was during this time that he also became a founding member of the governing body of ncaer. after resignation from the union cabinet over a matter of principle, he served at various times as chairman of the university grants commission, vice - chancellor of the university of delhi, president of the indian statistical institute, and founding member and lifetime president of the india international center. among his many contributions were his insightful interventions at bretton woods as part of the indian delegation to that historic meet. he was awarded the padma vibhushan in recognition of his services. sir c. d. deshmukh died in 1982. c. d. deshmukh was an institution builder. i am currently the caretaker of one he led, the reserve bank of india. let me assure him that the reserve bank is in fine fettle. in a country where time has weighed heavily on the quality of institutions, the integrity, capability, and motivation of my colleagues allows the reserve bank to continue to stand tall. the world today, however, is much less comforting. industrial countries are still struggling, with a few exceptions, to grow. our fellow brics all have deep problems, with confidence about china waxing and waning. indeed, india appears to be an island of relative calm in an ocean of turmoil. what is different here and how can we be assured that it will continue? a lesson from brazil? perhaps brazil offers a salutary lesson. only a few years ago, the world was applauding the country ’ s thriving democracy, its robust economic growth, and the enormous strides it was making in reducing inequality. it grew at 7. 6 percent in 2010, and had discovered huge oil reserves which the