din from the swami vivekananda road ( s v road ), and the serene breeze and waves of the juhu beach. i grew up on a crowded street in girgaum, in south mumbai. observing from our first floor window how people went about their lives on the streets was a favorite pastime in our childhood days. conditioned by that, while i ’ m on the terrace my eyes invariably end up focusing on the slums of nehru nagar. far into the narrow alleys, bustling and jostling in high density are the slum - dwellers, appearing as diminutive figurines, with much activity and life all around. a man is fixing dish antenna on top of his blue roof ; an old couple are perched outside a modest hut, savoring what must be some scrumptious desi chat ; a woman slamming blow after blow on the clothes she has carefully aligned to wash ; and almost always a group of children gleefully running around, mostly playing cricket and seasonally flying kites. some of the evenings, a plane takes off from the domestic or international airport in the east and heads westward on its way ; and a chopper swings in and lands at pawan hans with much acoustic fanfare. as these sophisticated means of modern transportation make their noisy presence felt, you can see the children bunch together, one of them pointing at the sky, others galvanising around him to marvel at the spectacle. an instant later of course, the children are nonchalantly back to gully cricket or running after a fallen kite. one cannot but hope that these children – in that brief moment of marvel – have been imbued with ambition ; that their eyes are now set on the sky ; that they will have the initiative and will get all opportunity to do what it takes to bridge the gap from their narrow alley to pawan hans helipad next door and to the flight of the giant mechanical birds that fly above. will these children take off? how will their journey be? where will they land? i ponder for a few seconds but then switch attention to the incessant honking of the s v road vehicles. image two. until about ten years back, i used to spend a decent chunk of my time as a doctoral student, and later as a professor, working with an indian ngo, focused on pre - primary and primary education. this activity had become my umbilical cord to india. on my holiday trips back home from

vigilance of the factors mentioned are warranted by rbi. we are monitoring ( a ) the process of restoration of full normalcy in global financial markets ; ( b ) the evolving financial contagion ; and ( c ) the possible spill over to the real sector after accounting for the possible extent of “ decoupling ”. the major reason for extraordinary vigilance by rbi is what i would describe as simultaneous volatilities in several globally significant markets, namely, money, credit and currency markets ; asset prices ; and commodity prices, especially oil and food items. the current phenomenon of simultaneous volatilities should be viewed in the context of possible repositioning of the world ’ s dominant reserve currency, involving significant wealth, income and terms of trade effects. similar stresses unlikely in india our banks with overseas presence have confirmed that they have insignificant exposure to the us sub prime mortgage market. some analysts have flagged the prospect of a sort of sub prime lending problem within india also. though there are reports of accelerated emergence of non - performing assets in regard to consumer credit, housing and real estate in a few banks, our preliminary assessment, on the basis of information provided, is that these do not have systemic implications either in terms of solvency or liquidity. there are several reasons why indian banking system may not invite disturbances akin to sub prime. first, pre - emptive monetary policy actions have been taken to address evolving monetary, credit and inflation environment. second, several prudential measures have been taken which include higher risk weights and higher provisioning in respect of sensitive sectors, namely capital market, housing, real estate etc. third, the initial exposure of most banks to the sensitive sectors mentioned above has been very modest. fourth, intensive supervisory review of select banks was undertaken when it was observed that their off balance sheet exposures appeared large or were rapidly accelerating. finally, as part of our regulatory regime in regard to banks and financial markets, there has been what may be termed as “ focus on liquidity ”. recent turbulence in global financial markets was characterized by liquidity issues and there is currently a global debate on the need to focus on liquidity. hence, a more detailed account of our regulatory focus on liquidity is appropriate. regulatory focus on liquidity as you are aware, the overall liquidity in the system is actively managed by the rbi mainly through the operation of laf on a daily basis. however, there are challenges in this regard due to volatility