6 %. in addition to inflation, however, a central bank has to pay attention to financial stability. this is a secondary objective, but it may become central if the economy enters a low - inflation credit and asset price boom. financial stability sometimes means regulators, including the central bank, have to go against popular sentiment. the role of regulators is not to boost the sensex but to ensure that the underlying fundamentals of the economy and its financial system are sound enough for sustainable growth. any positive consequences to the sensex are welcome but are only a collateral benefit, not the objective. finally, india will, for the foreseeable future, run a current account deficit, which means we will need net foreign financing. the best form of financing is long term equity, that is, foreign direct investment ( fdi ), which has the additional benefit of bringing in new technologies and methods. while we should not be railroaded into compromising india ’ s interest to attract fdi – for example, the requirements to patent a medicine in india are perfectly reasonable, no matter what the international drug companies say – we should ensure policies are transparent and redress quick. if we make it easier for young indian companies to do business, we will also make it easier for foreign companies to invest, for after all both are outsiders to the system. this means a transparent and quick legal process to deal with contractual disputes, and a proper system of bankruptcy to deal with distress. both are issues the government has taken on. let me turn finally to the international framework. 4 ) work towards a more open and fair global system as a country that does not belong to any power block, and that does not export vital natural resources but is dependent on substantial commodity imports, india needs an open, competitive and vibrant system of international trade and finance. our energy security, for example, lies not in owning oil assets in remote fragile countries but in ensuring the global oil market works well and is not disrupted. we need strong independent multilateral institutions that can play the role of impartial arbiter in facilitating international economic transactions. unfortunately, the international monetary system is still dominated by the frameworks put in place in the past by industrial countries, and its governance is still dominated by their citizens. to be fair, it is changing, albeit slowly. but there is a more immediate reason for faster change. with slow growth, as well as the need to finance large debt loads, the interest of industrial countries in an open global system

gordon, r. ( 2012 ), “ is us economic growth over? faltering innovation confronts six headwinds ”, nber working paper 18315. cited in footnote 1. luigi buttiglione, philip lane, lucrezia reichlin and vincent reinhart, deleveraging? what deleveraging?, 2014, geneva reports on the world economy. bis central bankers ’ speeches immigration and trade, which the middle class is led to believe are responsible for its plight, is very real. the mediocre economic outlook might change. strong us growth could pull the world out its funk, while low oil prices could also give a substantial boost to aggregate demand. the industrial world may well muddle through for a while before it figures how to harness and monetize ( as well as measure ) new technologies. new well - paying middle class jobs that we cannot imagine today may emerge once again, as they always have. but overall, there is a palpable sense of gloom in the industrial world, a belief that growth is unlikely to be strong enough to satisfy for the foreseeable future. if secular stagnation persists, industrial countries will have to figure out how to restructure their promises, whether debt, social security, or low taxes, and how to distribute the burden. after filing for bankruptcy, the city of detroit in the united states has already had to make tough choices, between servicing its pensioners or its debt, keeping its museums open or its police force intact. more such difficult decisions will have to be made. what about emerging markets? slow industrial country growth has made more difficult a traditional development path for emerging markets – export - led growth. indeed, in the last decade, even as china developed on the back of its exports to industrial countries, other emerging markets flourished as they exported to china. emerging markets now have to rely once again on domestic demand, always a difficult task because of the temptation to overstimulate. that task has become more difficult because of the abundance of liquidity sloshing around the world as a result of ultra - accommodative monetary policies in industrial countries. any signs of growth can attract foreign capital, and if not properly managed, these flows can precipitate a credit and asset price boom and exchange rate overvaluation. when industrial country monetary policies are eventually tightened, some of the capital is likely to depart emerging market shores. emerging markets have to take extreme care to ensure