causes, overemphasising financial standards could detract attention from other policy priorities. the relative importance of financial standards in crisis prevention must also be adjudged from the standpoint of the relative openness of the economy ’ s capital account and in this sense the “ one size fits all ” approach may have to be eschewed. 1. 8 since the primary motive for having standards is to catalyze orderly capital flows, while ensuring financial stability, greater consultation with the private sector in evolving and prioritizing of core standards is of utmost necessity. all standards and codes are not equally relevant to all segments of private sector and further they do tend to evolve over a period reflecting concerns of both public policy and market participants. 1. 9 it is gratifying to note that currently there is a better appreciation of india ’ s stand in the international fora as compared with the past. ii. india ’ s association with the global efforts in fostering international standards and codes 2. 1 india has been closely associated with various standard setting bodies and has been taking active part in the work of several key international fora devoted to the task of developing and promoting implementation of financial standards and codes. although india is not a member of the @ financial stability forum ( fsf ), it was one of the countries specially requested to help the forum in task force on the implementation of standards and to participate in the joint committee group meeting. the task force was set up to explore key issues relating to standards / codes / core principles and consider the strategy for fostering the implementation of international standards relevant for a sound financial system. 2. 2 the reserve bank is also represented at the follow up group on incentives for implementation of standards instituted by the fsf following submission of the task force report. the group has been ascertaining how various elements of market and official incentives could best reinforce one another within the framework of the overall strategy to foster implementation of standards and, for this purpose, engages in a dialogue with a cross section of relevant market participants. 2. 3 reserve bank of india officials worked closely with the basel committee on banking supervision ( bcbs ). in 1997, in consultation with the supervisory authorities of a few non - g - 10 countries including india, the bcbs drew up the 25 ‘ core principles for effective banking supervision ’ aimed at guiding supervisory authorities seeking to strengthen their current supervisory regime. 2. 4 from its inception, india was also represented on the group on joint task force

ample liquidity, it points to upside risks to price stability over the medium to longer term. monetary developments therefore continue to require very careful monitoring, particularly against the background of a solid expansion in economic activity and continued strong property market developments in many parts of the euro area. to sum up, in assessing price trends it is important to look through any short - term volatility in inflation rates. the relevant horizon for monetary policy is the medium term. risks to the medium - term outlook for price stability remain on the upside, relating in particular to stronger than currently expected wage developments in a context of robust ongoing growth in employment and economic activity. given the vigorous monetary and credit growth in an environment of already ample liquidity, a cross - check of the outcome of the economic analysis with that of the monetary analysis supports the assessment that upside risks to price stability prevail over the medium to longer term. the governing council will continue to monitor very closely all developments so that risks to price stability over the medium term do not materialise. this will support the solid anchoring of medium to longer - term inflation expectations in the euro area at levels consistent with price stability. therefore, looking ahead, acting in a firm and timely manner to ensure price stability in the medium term remains warranted. as regards fiscal policy, there is growing confirmation that the favourable cyclical developments led to better than expected budgetary outcomes in 2006 in a number of countries and in the euro area as a whole. however, updated stability programmes foresee only moderate progress with fiscal consolidation in the coming years. in this respect, some countries ’ consolidation targets appear not fully in line with the requirements of the revised stability and growth pact. risks stem in particular from a lack of well - specified and credible measures, notably on the expenditure side of budgets. given the favourable economic environment, the governing council considers it essential that procyclical policies are avoided in all euro area countries and that sufficiently ambitious fiscal consolidation efforts are made in the countries with remaining budgetary imbalances and / or high public debt outstanding. the opportunity should be seized to attain sound public finances within the programme horizons and by 2010 at the latest in all euro area countries. fiscal consolidation that is part of a medium - term - oriented, credible and expenditure - based reform strategy would support longerterm output and employment growth and help prepare for the fiscal impact of population ageing. as regards structural reforms, the european council will discuss the current state of, and future progress in,