can lead to wrong interpretations and unintended consequences. recent statements from the us fed on tapering of the qe. communication should not be one way. we should also listen. • town hall meetings ( at least once every year. chandigarh, jaipur, pondicherry ) • june 29 – on illegal, unlawful financial schemes – ponzi, multi - level marketing schemes – cheating people. • media conferences • post - policy teleconference • pre - policy consultations • consultative : discussion papers on policy initiatives. on new bank licences, on subsidiarization of foreign banks, deregulating interest on savings bank deposits, white label atms, risk based supervision. 6th attribute : open minded, communicative and consultative. 7th attribute : outreach 33. knowledge institution – effort at outreach – to get exposed to the real world. • reserve bank cannot function in an ivory tower. • growth, inflation, interest rates and exchange rates are not mere statistics. they impact people ’ s everyday lives. • outreach programme to listen and understand. to explain. • chennai – town hall meeting ( 3 years ago on the steps of the egmore museum ) • • • – inflation ( middle aged people ) – growth ( young people ) village immersion programme for drs – how do the poor live? – how do they manage their finances? frontline managers conference – bc : bm makes me wait in the line – humiliated in front of clients. you learn stuff that meetings, seminars, conferences and reports do not give you. bis central bankers ’ speeches 34. 7th attribute : outreach. understand the world for which we make policy. 8th attribute : takes accountability seriously 35. 36. knowledge institution – takes accountability seriously • as rbi, we jealously guard our autonomy • “ rbi is independent. ” we know public interest. no one should interfere. • but the autonomy that we assert so vehemently has to be earned. not demanded. need to earn by rendering accountability. • we are an unelected body of officials making public policy with enormous implications for people ’ s everyday lives. • accountable for results – explain growth, inflation • open to be challenged • governor to go before the standing committee of the parliament 8th attribute : takes accountability seriously. 9th attribute : think positive 37. 38. knowledge institution – think positive • executive of a shoe company to explore the demand for shoes • nobody wears shoes. no demand. • rival company : nobody wears shoes.

developments, according to eurostat ’ s flash estimate, annual hicp inflation was 2. 2 % in march 2006, compared with 2. 3 % in february and 2. 4 % in january. in the short run, inflation rates are likely to remain above 2 %, with the precise levels depending largely on developments in the more volatile components of the index. beyond the short term, changes in administered prices and indirect taxes are expected to significantly affect inflation in 2006 and 2007, and an upward impact may also be expected from the indirect effects of past oil price increases. at the same time, wage dynamics in the euro area have remained moderate over recent quarters and growth in wages is expected to remain contained, partly reflecting strong global competitive pressures, particularly in the manufacturing sector. over the recent past, moderate wage trends have helped to dampen domestic inflationary pressures ; looking ahead, it is crucial that the social partners continue to meet their responsibilities in this regard, also in the context of a more favourable economic environment. risks to the outlook for price developments remain on the upside and include further increases in oil prices, a possibly stronger pass - through of oil price rises into consumer prices than currently anticipated, additional increases in administered prices and indirect taxes, and – more fundamentally – stronger wage and price developments than expected due to second - round effects of past oil price increases. turning to the monetary analysis, the latest developments confirm that the stimulative impact of the low level of interest rates remains the dominant factor behind the high trend rate of monetary expansion. moreover, the annual growth rate of credit to the private sector has continued to increase over recent months, with borrowing by households – especially loans for house purchase – and nonfinancial corporations rising rapidly. overall, strong monetary and credit growth in an environment of ample liquidity in the euro area continues to point to upside risks to price stability over the medium to longer term. to sum up, annual inflation rates are projected to remain elevated in 2006 and 2007, and the economic analysis indicates that the risks to price stability remain on the upside. given the strength of monetary growth and the ample liquidity situation in a context of improving economic activity, crosschecking the outcome of the economic analysis with that of the monetary analysis supports the assessment that upside risks to price stability over the medium to long term prevail. it is essential that medium - term inflation expectations remain firmly anchored at levels consistent with price stability. accordingly, the governing council will continue to monitor very closely all developments