ahead conduct of monetary policy is complex. it has not only to be forward looking but also to grapple with uncertain future. additional complexities arise in the case of an emerging market like india, which is transiting from a relatively closed to a progressively open economy. in an environment of increasing capital flows, narrowing cross - border interest rate differentials and surplus liquidity conditions, exchange rate movement tends to have linkages with interest rate movements. the challenge of a monetary authority is to balance the various choices into a coherent whole and to formulate a policy as an art of the possible. let me now conclude by wishing this conference all success.

##ors ) and the absence of any amnesty. some aspects of gold market in india risk and return on gold investments the return from investments in gold may be compared with the return on investment in government bonds in the indian markets. illustratively, if gold had been purchased at end - february 1996 and sold at end - february 2002 at the prevailing rates in the local bullion market, the average annualised return would work out to be negative. on the contrary, investment in a liquid risk - free government security on the same date would have fetched a comfortable positive return, and in case capital gains through marked to market is also taken into account, the annualised average return could be as high as 15 per cent. recent research in gold markets a drg study ( gold mobilisation instrument as an external adjustment ) prepared in the rbi in 1992, tested five factors for their influence on demand for gold : they are, generation of large market surplus in rural areas as a result of all round increase in agricultural production, unaccounted income / wealth generated mainly in the service sector, comparative rate of return available on alternative financial assets like bank deposits, units of uti, small saving schemes etc., price variation in gold and price of other commodities. the study led to the conclusion that the first two factors i. e. rural surplus and unaccounted income in the service sector have far more influence on gold demand than the other factors. in another analysis made by shri vaidyanathan in 1999, ( economic and political weekly, february 20, 1999 ) the factors determining the demand for gold were studied. the parameters taken into account were gdp, ratio of household financial savings to national product, domestic price of gold, gdp deflator, index of ordinary share prices and the difference between domestic and foreign price of gold as percentage of international prices. the study established that gold imports tend to be higher when domestic gold prices rise relative to those of ordinary shares and international gold prices ; but, the effect of these two variables was pronounced during 1991 - 96 as compared to 1970 - 90. dr. saumitra chaudhuri ( financial express, november 26, 2001 ) made an analysis of the possible choices for a saver between interest bearing financial instruments and gold. he advocates that in indian conditions, a return of less than 6 per cent for a saving instrument would induce the saver to invest in gold. mr. n. a. mazumdar, in many of