stability unit which will make regular and systematic assessment of the stability of the indian financial system. 13. lord turner will be speaking to us today on “ after the crises : assessing the costs and benefits of financial liberalization ”, a topic of great obvious relevance. 14. a study of financial crises shows that almost every crisis is preceded by, if i may use what is by now a cliche, “ irrational exuberance ” of the financial sector with the growth of the financial sector outstripping the growth of the real sector engendering a belief, bordering on hubris, that real value can be created by sheer financial engineering. take this crisis for example. 15. in the world that existed before the crisis – a benign global environment of easy liquidity, stable growth and low inflation – profits kept coming, and everyone got lulled into a false sense of security in the firm belief that profits will keep rolling in forever. herb stein, an economist, pointed out the truism that, “ if something cannot go on for ever, it will eventually stop. ” but no one paid attention. the magic of the financial sector gave it such a larger than life profile that we began to believe that for every real life problem, no matter how complex, there is a financial sector solution. now, of course, we know better – for every real life problem, no matter how complex, there is a financial sector solution, which is wrong. 16. take the case of the united states. over the last 50 years, the share of value added from manufacturing in gdp shrank by more than half from 25 per cent to 11 per cent while the share of financial sector more than doubled from 3. 6 per cent to 7. 5 per cent. the job share of the manufacturing sector declined by more than half from 29 per cent to 11 per cent while the job share of the financial sector increased by over a third from 3. 5 per cent to 4. 6 per cent. the same trend is reflected in profits too. over the last 50 years, the share of manufacturing sector profits in total profits declined by more than half from 49 per cent to 21 per cent while the share of profits of the financial sector increased by more than half from 17 per cent to 27 per cent. clearly, the excessive risk - taking behaviour of the financial sector raised the value - added of the sector beyond a sustainable level making the melt down, in retrospect, inevitable. 17. forgotten in the eu

. incoming data, notably survey results, continue to point to solid, broadbased growth in the period ahead. the pass - through of our monetary policy measures has facilitated the deleveraging process and should continue to support domestic demand. in particular, the recovery in investment continues to benefit from very favourable financing conditions and improvements in corporate profitability. employment gains, which are also benefiting from past labour market reforms, are supporting real disposable income and private consumption. moreover, the global recovery is increasingly supporting trade and euro area exports. however, economic growth prospects continue to be dampened by a sluggish pace of implementation of structural reforms, in particular in product markets, and by remaining balance sheet adjustment needs in a number of sectors, notwithstanding ongoing improvements. this assessment is broadly reflected in the june 2017 eurosystem staff macroeconomic projections for the euro area, finalised in late may, which are conditional on the full implementation of all our monetary policy measures. these projections foresee annual real gdp increasing by 1. 9 % in 2017, by 1. 8 % in 2018 and by 1. 7 % in 2019. compared with the march 2017 ecb staff macroeconomic projections, the outlook for real gdp growth has been revised upwards over the projection horizon. 1 / 2 bis central bankers'speeches the risks surrounding the euro area growth outlook are considered to be broadly balanced. on the one hand, the current positive cyclical momentum increases the chances of a stronger than expected economic upswing. on the other hand, downside risks relating to predominantly global factors continue to exist. according to eurostat ’ s flash estimate, euro area annual hicp inflation was 1. 4 % in may, following 1. 9 % in april and 1. 5 % in march. as expected, the recent volatility in inflation rates was mainly due to energy prices and temporary increases in services prices over the easter period. looking ahead, on the basis of current futures prices for oil, headline inflation is likely to remain around current levels in the coming months. at the same time, measures of underlying inflation remain low and have yet to show convincing signs of a pick - up, as unutilised resources are still weighing on domestic price and wage formation. underlying inflation is expected to rise only gradually over the medium term, supported by our monetary policy measures, the continuing economic expansion and the corresponding gradual absorption of economic slack. this assessment is also broadly reflected in the june 2017 eurosystem staff macroeconomic projections