some financial institutions, we should be willing to cut the funds rate to zero, should that prove necessary to provide the required support to the economy. should the funds rate approach zero, the question will arise again about so - called nontraditional monetary policy measures. i first discussed some of these measures in a speech last november ( bernanke, 2002 ). thanks in part to a great deal of fine work by the staff, my understanding of these measures and my confidence in their success have been greatly enhanced since i gave that speech. without going into great detail, i see the first stages of a “ nontraditional ” campaign as focused on lowering longer - term interest rates. the two principal components of that campaign would be a commitment by the fomc to keep short - term yields at a very low level for an extended period ( i ’ ll say more about this in a moment ) together with a set of concrete measures to give weight to that commitment. such measures might include, among others, increased purchases of longer - term government bonds by the fed, an announced program of oversupplying bank reserves, term lending through the discount window at very low rates, and the issuance of options to borrow from the fed at low rates. i am sure that the fomc will release more specific information if and when the need for such approaches appears to be closer on the horizon. i motivated today ’ s talk by reference to the may 6 statement. let me end the talk by discussing the role of such statements in both traditional and nontraditional monetary policy. a crucial element of the statement was an implicit commitment about future monetary policy ; namely, a strong indication that, so long as a substantial fall in inflation remains a risk, monetary policy will maintain an easy stance. particularly at very low inflation rates, a central bank ’ s ability to make clear and credible commitments about future policy actions - - broadly, how it plans to adjust the short - term interest rate as economic conditions change - - is crucial for influencing longer - term interest rates and other asset prices, which are themselves key transmission channels of monetary policy ( eggertsson and woodford, 2003 ). the question is, then, how can the fed sharpen the communication of its policy commitments? for example, how could the fed be more precise about how long it will maintain monetary ease or about the conditions under which it would change its policy? in my view - - and here i am quite obviously speaking for myself - -

improvement. but in recent years, there has been growing concern about the erosion at the margins of food self - sufficiency. a big challenge for sustaining food self - sufficiency is raising production which, given that available land is fixed if not diminishing, has to come from improved productivity. a host of cash and non - cash inputs is necessary to improve productivity, and an important one is agricultural credit. development experience shows that credit is an important determinant of value added in agriculture. a quick assessment by the reserve bank of the relationship between institutional credit to agriculture ( from commercial banks, cooperatives and rrbs ) evidences positive and statistically significant elasticity – every 1 per cent increase in real agricultural credit bis central bankers ’ speeches results in an increase in real agricultural gdp by 0. 22 per cent with a one - year lag. 1 further, the granger causality test ( based on lag length of 1 ) also indicates that the causality was unidirectional from agricultural credit to agricultural gdp. iii. looking back – major policies for promoting agricultural credit in order to look ahead, it will be instructive to look back on the policies that shaped the flow of agricultural credit over the last 60 years. in the first two decades after independence, the conduit for institutional credit to agriculture was the cooperative sector. although sound in concept, the cooperative sector failed to live up to expectations. with the nationalisation of commercial banks, the decade of 1970s marked the entry of commercial banks into agricultural credit. this period saw the introduction of the lead bank scheme and regulatory prescription of priority sector lending – two landmark development policies that survive even today. the 1970s also witnessed pilot experiments in specialised agency approach for directing credit to small and marginal farmers. the small farmers development agency ( sfda ) and marginal farmers and agricultural labourers development agency ( mfalda ) that were started in select districts of the country on a pilot basis had later been extended to the whole country as district rural development agencies, which now play a central role in coordinating and managing the several poverty alleviation initiatives at the district level. the economic reforms of the 1990s, starting with the first narasimham committee of 1991, emphasised financial soundness and operational efficiency of the financial sector – including rural financial institutions. the reserve bank gradually deregulated the interest rate regime to aid improvement in the operational efficiency of banks. the next two decades witnessed several important innovations in agricultural credit. both direct and