, but it gets exacerbated by the international capital flows, particularly when the changes in such flows happen to be unrelated to domestic fundamentals. in such a situation, managing the transition turns out to be a critical challenge for policy making, and the management requires a more difficult and dynamic trade off between commitment and flexibility in policy. overall, while added risks – both upside and downside – are inevitable with increasing global financial and economic integration, the emes may consider strengthening their resilience through not only sound macroeconomic management but also by adopting appropriate prudential measures. over a period, co - ordinated efforts, both at regional as well as global levels, could also help emes to cushion themselves better against the risks of financial globalisation. thank you. 6 / 6

the cost structure of skill - based services. • it is now feasible to “ unbundle ” production of different types of goods and services. india does not necessarily have to be a low - cost producer of certain types of goods ( e. g., computers or discs ) before it can become an efficient supplier of services embodied in them ( e. g., software or music ). at the same time, it must be recognised that the “ death of distance ” and the growing integration of global product, services and financial markets in recent years have also presented new challenges for management of the national economy – not only in india but all over the world. the trend towards integration of markets, particularly financial markets, is by no means an unmixed blessing. unlike the old days, a heavy price may have to be paid by national economies for somnolence, sloth and non - conformity to generally accepted international norms and standards of macro - economic management, disclosure, transparency and financial accountability. another consequence of recent global trends is the greater vulnerability of national economies to developments outside their own borders. a crisis in any one or a group of countries, can be transmitted to other countries – including countries which may not have any strong economic linkages with crisis - affected countries. thus, the ’ nineties have been marked by a large number of currency crises ( for example, in mexico, russia, east asia and brazil – and currently argentina and turkey ) ; substantial swings in exchange rates ( including the exchange rate of three leading currencies – the dollar, the euro and the yen ) ; and run ups in asset prices followed by sharp collapse ( for example in japan and east asia earlier and the united states last year ). while the crises initially occur in one or two specific countries, their adverse effects are felt across the world. while we must be careful, on the whole, in my view, – the death of distance, the services revolution, and the mobility of capital – which characterise globalisation – present unprecedented opportunities for india. the primary source of comparative advantages today are : skills and ability to adapt and change. and, india has the advantage – of skills, of entrepreneurship and of managerial competence in taking advantage of these changes. if what i have said is correct, then, why are we not jumping with joy and optimism? why are we so “ unglobalised ” in terms of our share in trade, investment or communication? transition from a closed to a