##economic prospects are currently seen to be broadly favourable, with the pace of growth being maintained and the inflation outlook softer. as already stated, however, the attendant risks from global developments relating to food, commodity, and energy prices remain and will have to be monitored carefully, and acted upon as necessary. in an overall perspective, the main objective of policy as set out in april, is to manage the transition to higher growth with price and financial stability. the key issues for the conduct of monetary policy in the context of this objective are a continuing emphasis on price stability and well anchored inflation expectations. this will involve managing liquidity in the presence of the pressures from high deposit growth, shifts in government cash balances and continuing capital flows. the flux in global financial markets is a clear and present danger to stability for which policy makers and all stake holders have to be well prepared. exchange rate movements have become amplified by these developments. going forward, it will be necessary to reinforce the commitment to financial stability alongside the containment of inflation so as to support growth. the reserve bank's annual policy statement had announced the initiation of further development of financial markets, such as the work related to currency futures, interest rate futures and credit default swaps. our annual publication, report on currency and finance has, this year, paid particular attention to the overall development of financial markets in some detail. the key element of our approach is the maintenance of financial stability, along with the continuous development of markets. against this backdrop and a careful assessment of the balance of risks, the projection of real gdp growth for 2007 - 08 has been retained around at 8. 5 per cent as in the annual policy statement. a key assumption is that agriculture will post a return to trend growth and the momentum will be maintained in industry and services. while the outlook for inflation remains unchanged, the policy priority in the first quarter review is to hold headline inflation within 5 per cent in 2007 - 08 and within 4. 0 - 4. 5 per cent over the medium term. while money supply and aggregate deposits are currently high, moderating the growth of these key aggregates has assumed policy priority. early indications suggest that the balance of payments position is strong, that the current account deficit will be managed within sustainable limits but the uncertainties and volatility associated with capital flows will test the evolving policy stance. while the domestic outlook is positive and should remain so with appropriate corrections in liquidity and financial market conditions to align them with the policy stance, it is the

urjit r patel : agricultural debt waiver - efficacy and limitations opening remarks by dr urjit r patel, governor of the reserve bank of india, at the seminar on " agricultural debt waiver - efficacy and limitations ", mumbai, 31 august 2017. * * * ladies and gentlemen, on behalf of the reserve bank of india, i warmly welcome you and thank you for accepting our invitation to join us today in this seminar. 1. in the recent period, farm loan waivers have engaged intense attention among the farming community, policy makers, academics, analysts and researchers. on the one hand, there is a gamut of issues that have intensified the anguish of our farmers. in this context, farm loan waivers have brought forward the urgency of designing lasting solutions to the structural malaise that affects indian agriculture. on the other, there are concerns about the macroeconomic and financial implications, how long they will persist in impacting the economy, the possible distortions that they could confront public policies with, and the ultimate incidence of the financial burden. 2. let me, in a modest way, try to eclectically address both sides of the debate. india's agrarian economy is the source of around 15 percent of gdp, 11 per cent of our exports and provides livelihood to about half of india's population. the importance of the sector from a macroeconomic perspective is also reflected in a significant flow of bank credit to finance agricultural and allied activities relative to other sectors of the economy. outstanding bank advances to agriculture and allied activities have risen from about 13 per cent of gdp originating in agriculture and allied activities in 2000 - 01 to around 53 per cent in 2016 - 17 ( chart 1 ). in real terms ( adjusted for inflation measured by the gdp deflator ), the growth of bank credit to agriculture and allied activities accelerated from 2. 6 per cent in the 1990s to 15. 4 per cent during 2000 - 01 to 2016 - 17. 3. much of this credit flow has been propelled by the policy thrust on expanding credit to agriculture, especially through priority sector lending ( psl ) stipulations. public sector banks and private banks are required to lend 18 per cent of annual net bank credit ( anbc ) or credit 1 / 4 bis central bankers'speeches equivalent amounts of off - balance sheet exposures, whichever is higher, to agriculture. under this carve - out, 8 per cent is prescribed for small and marginal farmers. even foreign banks with 20 branches and above have to achieve