so disparate? some of you might have watched the movie, " the good, the bad, and the ugly ", released, coincidentally, exactly 40 years ago. set during the american civil war, it was about three bandits who each held one clue to a hidden trove of gold coins. they did not trust each other, and wanted all the money for themselves. in the end, the " good " bandit who put all the three clues together won. discovering the secrets of economic growth is in a sense like looking for clues to a hidden treasure. we may each hold some clues but it is not easy to piece all of them together to achieve resilient growth. the title of the movie is also apt, i think, for categorising the growth experience of the 16 countries in my williams class. malaysia, which was represented in my class, enjoyed steady economic expansion of around 4 % to 5 % in real gdp per capita since the mid - 1960s. it obviously falls into the " good " category. i put india in the same category primarily because of its advances in the past 10 years. others like egypt, pakistan and honduras have stagnated. i would term their performance as " bad ". for all their efforts, their per capita gdp has not gone up much. but they are at least better off than others like bolivia and tanzania which have regressed, and are poorer now than they were in 1966. their record is " ugly ". why have countries travelled such divergent " good, bad and ugly " growth paths when they had all aspired for the same goal of a better life? in the past, economic theory has focused on the importance the williams college 16 were : singapore, malaysia, india, pakistan, philippines from asia ; egypt, ethiopia, kenya, liberia, tanzania, uganda from africa ; bolivia, colombia, honduras, mexico from latin america ; and yugoslavia from europe. of factor inputs, productivity and technology. of late, however, academics have started to recognise how critical leadership, politics, good governance and institutions are to growth. i believe that to trigger off and sustain economic growth, three necessary conditions are required : • first, vision and ideas ; • second, sense of reality ; and • third, good implementation as the first and second factors are related, i will discuss them together. vision and ideas and sense of reality first, vision and ideas. by this, i mean that leaders must offer a political and economic vision to ex

perfect measure of demand - side inflation – what is conventionally referred to as “ core ” inflation – a practical measure that reflects the underlying forces to an extent is the sub - component of the manufacturing component of the wpi, which excludes food products. chart 3 displays the pattern of this sub - component “ non - food manufacturing inflation ”. as growth slowed in 2008 – 09, this indicator also moved downwards. it actually went into negative territory for a few months, before turning marginally positive in december 2009. while this turnaround was clearly not indicative of any rapid build - up of demand pressures, the fact that it had happened was a signal that the business cycle had bottomed out and growth was on its way back up. however, after that rather sedate start, this indicator began to accelerate rather rapidly in the early months of 2010. at the time that this article was written, the numbers for june 2010 had just been released ; this indicator had risen to 7. 3 per cent. the inflation rates that the economy is now experiencing, both from the supply and the demand sides, are clearly a matter of great concern. it is incumbent on the government and the central bank to use all the means at their disposal to rein inflation in. in this effort, monetary policy has two specific objectives : ( i ) to prevent the spillover of supply - side pressures into a more broad - based inflationary process and ( ii ) to moderate demand to levels consistent with the capacity of the economy to meet it without provoking price increases. monetary policy : thought and action let us look at the thinking and actions on the monetary front against the backdrop laid out above. as already indicated, drastic monetary actions were taken during the last quarter of 2008, sharply bringing down both the policy rates and the crr. looking back on this period, it can be reasonably argued that these measures contributed to the stabilization of the economy and the relatively small impact of the crisis by infusing massive amounts of liquidity into the system. the fiscal stimulus, which came in various forms during the same period, helped by directly creating demand in a situation in which private demand was sluggish. without these combined interventions, the outcome would almost certainly have been far worse. the monetary stance remained in a critically supportive mode until october 2009, when the first steps to move towards a normal position were taken. table 1 lists all the monetary actions taken from then until end - july 2010. four key concerns have influenced the sequence and magnitude