excessive risk taking, loose underwriting standards, and asset overvaluations, all of which have in the absence of timely effective actions laid the seeds for crises. second, the limitations in regulatory arrangements, including the capital adequacy framework, contributed to the growth of unregulated exposures, excessive risk - taking and weak liquidity risk management. third, weaknesses in the application of accounting standards and the shortcomings associated with the valuation and financial reporting of structured products played a significant role in the current turbulence through pro - cyclical valuations and lack of full disclosure of banks ’ true risk profile through the cycle. fourth, the crisis revealed the need to adapt some of the tools and practices of central banks to manage system liquidity in the light of banks ’ cross - border operations. the recent experiences have highlighted the differences in emergency liquidity frameworks of central banks, on aspects such as range of collateral, range of eligible counterparties ; and the differences in central bank practices. fifth, supervisors did not adequately address deterioration in risk management standards in the regulated entities, which did not fully reckon the risks associated with new financial instruments, and there were shortcomings in consolidated supervision. sixth, deficiencies in crisis management and bank resolution frameworks, including deposit insurance, have been observed, especially where central banks do not have a central supervisory role. seventh, the complex inter - relationship between regulation, the inappropriate accounting practices, and regulators ’ excessive dependence on external ratings may have exacerbated the market turbulence. menu of solutions the above underlying factors clearly demonstrate a need to enhance the resilience of the global system and consider some of the prescriptions that have been proffered for the consideration of the policy makers. the recent developments in the global financial markets have been closely followed by many. these include market participants, central bankers, supervisors, multilateral institutions, political leaders, analysts, academicians, and also the layman. with so much attention being focused on the ongoing turbulence, by so many stakeholders, we have a wide menu of solutions and prescriptions. i will quickly run - through some of these. first, risk management frameworks including the governance arrangements in banks and financial institutions need to be reviewed by the managements in the light of the recent experiences. second, supervisors need to play a more active role in scrutinizing the risk management practices, including stress testing and governance arrangements, off balance sheet entities and structured products.. at the same time,

in reserve bank of india give grounds for optimism in regard to their fiscal health. we recognize two important areas which will result in fiscal empowerment. one is elimination of subsidies which are not appropriate, and elimination of tax exemptions, which are distortionary. while in any polity fiscal consolidation is hard, it is particularly so in our setting, but there are grounds for optimism. • third, and perhaps the most challenging issue relates to development of agriculture. while over 60 per cent of the workforce is dependent on agriculture, the gdp growth generated from agriculture is only marginally above the rate of growth of the population, which is not adequate to ensure rapid poverty reduction. to facilitate a more rapid growth in agriculture, legislative, institutional and attitudinal changes to supplement enhanced public and private investment are needed. there is an increasing recognition of this issue among policy makers. • fourth, there is a need to shift the emphasis to attracting foreign direct investment, which is less volatile. this requires a more favourable investment climate in general both for domestic and foreign capital. • fifth, delivery of essential public services such as education and health to large parts of our population is a major institutional challenge. it is strongly felt that education will empower the poor to participate in the growth process and the large gaps in availability of health in terms of minimum access to the poor needs to be filled. • with rapid growth in manufacturing and services, a sudden and intense pressure has developed in regard to availability and quality of urban infrastructure and urban services. a notable beginning has been made in this direction with the launching of " national urban renewal mission ". implications of global imbalances for india • india has not contributed either positively or negatively in terms of large current account surplus or large current account deficit ; saving - investments have been by and large balanced ; the economy is domestic demand driven and generally our policies, including exchange rate are market oriented. thus, india has been following policies which not only served it well but also contributed to global stability. • any large and rapid adjustments in major currencies and related interest rates or current accounts of trading partners would impact the indian economy though the impact on india may be less than many other emerging market economies. • india does not depend on the international capital market for financing the fiscal deficit and consequently to some extent adverse consequences of the global developments would be muted. however, there could be a spill - over effect of global developments on domestic interest rates and thus on fisc also. • any abrupt adjustment