alan greenspan : stability and economic growth a€ “ the role of the central bank remarks by mr alan greenspan, chairman of the board of governors of the us federal reserve system, before the banco de mexico's 80th anniversary international conference, mexico city ( via videoconference ), 14 november 2005. * * * international finance presents us with a number of intriguing anomalies, but the one that seems to bedevil monetary policy makers the most as they seek stability and growth ( the topic of this conference ) is the seemingly endless ability of the united states to finance its current account deficit. to date, despite a current account deficit exceeding 6 percent of our gross domestic product ( gdp ), we - - or more exactly, the economic entities that comprise the u. s. economy - - are experiencing few difficulties in attracting the foreign saving required to finance it, as evidenced by the recent upward pressure on the dollar. the markets are not behaving in the way that some, if not most, analysts anticipated as the u. s. current account deficit rose above its previous high of 3 - 1 / 2 percent of gdp recorded in 1986. of course, deficits that cumulate to ever - increasing net external debt, with its attendant rise in servicing costs, cannot persist indefinitely. at some point investors will balk at further financing. such a development would be particularly likely should risk - adjusted rates of return on assets outside the united states rise relative to investment opportunities in the united states. even if such returns on u. s. assets stay high, the rise of concentration risks in foreign official and private portfolios could still induce investors to slow their accumulation of dollar claims and thereby delimit the size of the financeable u. s. current account deficit. however, the adjustment of the u. s. external balance, when it comes, doubtless will be initiated by the actions both of foreign investors and of u. s. residents. whatever the triggers for adjustment, the move toward current account balance, in addition to being driven by foreign investors altering their external portfolios, presumably would also reflect actions by u. s. residents to address domestic imbalances. in all instances, a current account balance is essentially the product of a wide - ranging interactive process that reflects the production and allocation of goods, services, and incomes among the residents of a country and those of the rest of the world. the outcome encompasses the full array of domestic and international product and asset prices

in 2002. however after 1991, the share of non institutional sources has increased ; specifically, the share of moneylenders in the debt of rural households increased from 17. 5 % in 1991 to 29. 6 % in 2002. in urban areas the share of non institutional sources has come down significantly from 40 % in 1981 to around 25 % in 2002. who are the excluded? the financially excluded sections largely comprise marginal farmers, landless labourers, oral lessees, self employed and unorganised sector enterprises, urban slum dwellers, migrants, ethnic minorities and socially excluded groups, senior citizens and women. while there are pockets of large excluded population in all parts of the country, the north east, eastern and central regions contain most of the financially excluded population. reasons for financial exclusion there are a variety of reasons for fi. in remote, hilly and sparsely populated areas with poor infrastructure, physical access itself acts as a deterrent. from the demand side, lack of awareness, low incomes / assets, social exclusion, illiteracy act as barriers. from the supply side, distance from branch, branch timings, cumbersome documentation and procedures, unsuitable products, language, staff attitudes are common reasons for exclusion. all these result in higher transaction cost apart from procedural hassles. on the other hand, the ease of availability of informal credit sources makes these popular even if costlier. the requirements of independent documentary proof of identity and address can be a very important barrier in having a bank account especially for migrants and slum dwellers. recent initiatives by reserve bank of india the period 1969 to 1991 saw a huge increase in the branch outreach in india as the average population covered by a bank branch fell from 64, 000 to 13, 711. in 1991 along with reforms for liberalising and opening the economy, financial sector reform aimed at deregulation, increased competition and strengthening the banking sector through recapitalisation and adoption of prudential measures. the indian banking industry today is quite robust and strong to be able to take on the challenges of achieving greater financial inclusion. in the annual policy of the reserve bank for 2004 - 05, the governor, dr. reddy observed and i quote – “ there has been expansion, greater competition and diversification of ownership of banks leading to both enhanced efficiency and systemic resilience in the banking sector. however, there are legitimate concerns in regard to the banking practices that tend to exclude rather than attract vast sections of population, in particular pensioners, self -