strong house price inflation as we can see from the chart, inflation - adjusted house prices have fluctuated over the past 150 years. house prices reached a preliminary peak in 1899, the year before the housing market crash in kristiania ( the name of oslo at the time ), falling thereafter, especially during and after the two world wars. if you had bought a home just before the kristiania crash, it would have taken more than 80 years for you to recoup your investment. and after the fall in house prices at the end of the 1980s, 12 years passed before prices returned to 1987 levels. following the banking crisis at the beginning of the 1990s, house prices took off and in real terms are now more than twice as high as before the housing bubble burst at the end of the 1980s. a home purchase has been for many years an exceptionally good investment. thanks to rapid house price inflation, many of us have accumulated considerable wealth – at least on paper. chart 6 : how much housing can an average wage buy? in the most of the past century, norwegians experienced a substantial rise in prosperity. larger and cheaper housing was a significant contributor. this meant an ordinary wage could by more housing space, even though the real price of housing also rose sharply. but since the beginning of the 1990s, the average house has become more expensive also relative to income. or to put it another way, an average wage can buy less than half as many square metres today than it could in 1991. chart 7 : higher debt – lower interest burden since our living conditions are generally not more cramped than before, you might think that we have to spend more of our income on financing our homes. but this is not the case. although we hold record - high levels of debt, our interest burden is not heavier now than it was 30 years ago. interest rates have fallen. since income has risen markedly at the same time, principal payments on large loans have also been manageable. norwegian households have responded by taking out increasingly larger mortgages to finance increasingly more expensive housing. this would not have been possible without access to cheap credit. low interest rates have made it possible to maintain housing quality, even though house prices have crept steadily upwards. moreover, lower interest rates, longer repayment periods and the introduction of interest - only periods have made it possible to borrow more without squeezing liquidity. this has also enabled prospective homebuyers to submit a bid higher than they normally would have done, with increasingly

deepak mohanty : india ’ s post - crisis macroeconomic challenges speech by mr deepak mohanty, executive director of the reserve bank of india, at the ruia college, mumbai, 28 august 2012. * * * the assistance provided by rajeev jain and binod b bhoi in preparation of the speech is acknowledged. i thank professor aditi abhyankar for the opportunity for being a part of such a distinguished panel and share my thoughts with the young audience. as the future of the country, you have a great stake in the performance of our economy in a globalised world : the opportunity it provides, the promise it holds and the challenges we face. therefore, the focus of my talk today is on the recent macroeconomic performance of the indian economy. as you know the indian economy experienced an acceleration in growth in the early 2000s which was dented by the global financial crisis, particularly after the collapse of lehman brothers in september 2008. though the world economy has recovered from the recession in 2009, it continues to be buffeted by problems. apart from the uncertainties in the global economy, indian economy faces challenges from several other domestic factors. against this background, i sequence my presentation as follows. first, i will situate india in the global economy under the rubric of emerging and developing economies ( edes ). second, i compare and contrast the macroeconomic performance in the post crisis 4 - year period of 2008 – 12 with the preceding high growth 5 - year period of 2003 – 08. third, i highlight a few key challenges that the indian economy needs to overcome to regain its growth momentum. finally, i conclude with the conjecture : when can india become a high middle - income country, for your inquisitive minds to ponder over? india in the world the global economic landscape has changed substantially over the past decade with the share of edes in the global gdp rising from about 20 per cent in 2000 to 36 per cent by 2011 in terms of us dollar at market exchange rate. in terms of purchasing power parity ( ppp ), the share rose from 37 per cent to almost 49 per cent. thus, at the current juncture, the global economic weight is equally split between the edes and advanced economies ( aes ). but, what is interesting is that the edes will continue to grow faster than the aes, even under adverse economic conditions. this will increasingly tilt the global economic balance in favour of edes. hence