, which holds back growth and new lending, even while dampening bank incentives to cut base rates. the short term macroeconomic priorities of the reserve bank are therefore clear : • help growth by bringing down inflation in line with the proposed glide path, thus creating room for monetary easing ; and • work with the government and banks on speeding up the resolution of distressed projects and cleaning up bank balance sheets. let me start first with inflation : i am sure many of you are interested in what we will do next on policy. for that, i think the best summary is still our last policy statement, from which i quote, “ significant uncertainty will be resolved in the coming months, including the likely persistence of recent inflationary pressures, the full monsoon outturn, as well as possible federal reserve actions. as the reserve bank awaits greater transmission of its frontloaded past actions, it will monitor developments for emerging room for more accommodation. ” having said all i want to say on future policy, let me explain what we have been doing so far, and why we have been doing it. bis central bankers ’ speeches inflation and growth despite india ’ s known antipathy towards inflation, we have experienced an average of more than 9 percent inflation between 2006 and 2013. the longer we had high inflation, the more the public ’ s expectations of inflation became entrenched at high numbers. because the public ’ s inflation expectations are adaptive – meaning they change only after they see a sustained change in realized inflation – we required a long period of low inflation before expectations came down. unfortunately, our past focus on wpi inflation, which puts weight on internationally traded goods like commodities rather than domestic non - traded goods like education and healthcare, meant that whenever international inflation came down, the clamour for rate cuts increased. so we often did not take the fight to domestic sources of inflation. put in technical terms, the real policy rate was below the neutral real rate for years, and coincided with a pick - up in cpi inflation. the strong disinflation, even deflation, in the world in the last few years gives us a golden opportunity to change. what better time than the current for an inflation prone country like india to bring its inflation finally in line with the world ’ s? with commodity prices declining and astute food management by the government, part of our work is done for us, without india having to undergo the kind of extreme demand compression that was seen in the volcker disinflation. indeed

is restricted to putting into circulation the coins received by it. then, there are issues arising out of similar shapes and sizes of coins of different denominations. last, but not the least, is the growing menace of forged notes in circulation and creating public awareness about various aspects of banknotes. recent measures in india a ) constitution of high level committee 11. to address the significant challenges faced by us in india and other related issues, a high level committee was recently constituted by goi ( chairman : dr. k. c. chakrabarty ) having members representing goi, rbi, note presses & mints. the committee reviewed the forecasting methodology and studied the international best practices in cash distribution by other central banks. it made wide - ranging recommendations, notably, ( i ) rbi to focus exclusively on management and planning of currency system while passing on the responsibility for distribution of banknotes and coins entirely to commercial banks, ( ii ) need to introduce private entrepreneurs for distribution of banknotes and coins on behalf of banks, if last mile connectivity for distribution has to be achieved, ( iii ) identification of a bank willing to assume leadership of currency management function in the district, etc. all these recommendations have been accepted and are at various stages of implementation. b ) distribution mechanism 12. the functions relating to issuance of currency ( both banknotes and coins ) and their management is performed by the reserve bank through its 19 issue offices and a network of 4, 209 currency chests and 3, 966 small coin depots spread across the country. despite the large number of currency chests ( extended arms of rbi ’ s issue department ), the primary responsibility for reaching currency to the banks rests with rbi because of the currency management structure. every year, based on the bank ’ s indent for banknotes and coins, the printing presses and mints dispatch notes and coins to the rbi offices. from the rbi offices, the notes and coins are remitted to currency chests operated by commercial banks. the central bank arranges for transport and police escort for transfer of treasure and bears all the expenditure related to it unlike other countries where the commercial banks are responsible for transport of cash. thus, distribution of cash in india is the primary responsibility of the central bank. the treasure held in the currency chests is the property of the central bank and is subject to audit / verification. any withdrawal or deposit in the currency chest by the bank holding the chest is reflected as debit / credit in the bank ’ s account held