sector accounts for 60 per cent of gdp and has been growing at 9 per cent per annum since the mid - 1990s, with potential for creating jobs and generating additional income. • there has been a significant decline in the poverty ratio during the 1990s as reflected in the latest survey of 2004 - 05 by the national sample survey organisation. the growth performance and potential augurs well for addressing concerns relating to disguised unemployment, seasonal unemployment and underemployment in the years ahead. • the fiscal position of the government, both central and states, is undergoing consolidation in terms of targeted reduction in fiscal deficit indicators. • the current account deficit ( cad ) to gdp ratio has been moderate in india. the current account remained in surplus during 2001 - 02 to 2003 - 04, before turning into a modest deficit since then. it is expected to continue to be in the range of 2 to 3 per cent under the projected outlook of 8 to 9 per cent growth rate during the eleventh five year plan. india's foreign exchange reserves now stand roughly at us $ 165 billion and are well in excess of total external debt of the country. • the financial markets, especially the money, government securities and forex markets have been nurtured and developed in view of their critical role in the transmission mechanism of monetary policy. • the financial sector has acquired greater strength, efficiency and stability by the combined effect of competition, regulatory measures, policy environment and motivation among the market players including banks. • the workers enjoy considerable freedom of movement, expression and rights, especially through unionisation which, while making some changes difficult, ensures a vibrancy and timely improvisation to deal with competition. major challenges for sustenance of indian growth process • first, the poor state of the physical infrastructure, both in terms of quantity and quality. the most important issue here is regulatory framework which is being addressed by the government. technological developments and rapid enhancement of domestic construction capabilities should aid the process of speedy and efficient implementation. given the healthy fundamentals of the domestic financial sector and the enhanced interest of foreign investors, funding should not pose any serious problem. one other concern has been the cost recovery, which is expected to improve with more public - private partnership. there are grounds for optimism for a medium term resolution of these issues. • second, fiscal consolidation. the recent budget of the central government brings the consolidation on track, targeting a gross fiscal deficit of three per cent of gdp by 2009 while eliminating revenue ( current ) deficit. our studies on state finances

to contain the contagion and restore confidence in the system in the first phase. the second phase would typically involve coping with the secondary effects of the crisis, for example, recession, if any, flight of capital, etc. the third phase of this process would involve affecting changes in the financial system to reduce risk and prevent future crises. simultaneously, the other key features of a crisis situation, viz., the unpredictability associated with the event, the speed with which it typically unfolds and the uncertain but dangerous outcomes that it can spawn, suggest that it is necessary to lay down a comprehensive contingency plan which envisages, in a given context, all possible crisis situations of varying gravity and possible decisions and actions as well as the framework under which decisions can be taken and implemented. a crisis management framework evolving events since august 2007 have put to test arrangements for crisis management and financial stability across the globe. swift and proactive action was indeed taken once the contours of the crisis started becoming clearer. once the crisis broke, central banks, governments and other regulators across the globe, including in india, managed to coordinate effectively to improvise solutions to the problems they faced. the experience, however, also revealed several shortcomings in the arrangements in place to manage the crisis, ahead of the crisis. the global financial crisis : analysis and policy implications, dick k. nanto, coordinator, october 2, 2009. bis central bankers ’ speeches drawing from the lessons learnt during this crisis, let me lay down some broad attributes, which i believe, are key to the design of an effective crisis management framework. let me confess at the very outset, however, that this list is far from exhaustive. crisis management remains an inexact science and i, along with all of you in central banks and other policy making institutions, continue to learn. first, there should be a clear assignment of responsibility for financial stability. where this responsibility is shared amongst different agencies, roles and responsibilities need to be clearly delineated and the protocol for coordination during crisis clearly spelt out. crisis management plans need to be flexible. the characteristics of a crisis can always differ from earlier crises, so authorities need to be prepared to apply flexibility rather than working from a set framework. effective crisis management hinges on the authorities identifying and addressing problems at an early stage implying that the processes that enable early identification of emerging systemic risks need to be strengthened. the framework for crisis management needs to strike an appropriate