formulation of monetary policy, it is considered good housekeeping to evaluate the balance of risks. there are several positive energies that are helping to shape the vision of india's future over the next few decades. the playout of these forces will condition the setting of future monetary policy. 3 / 8 bis - central bankers'speeches first, there is a traditional advantage that is likely to continue working in favour of india's growth prospects. the development process has been predominantly driven by capital accumulation, which makes investment the main lever of growth. the investment rate peaked at close to 40 per cent of gdp in 2010 - 11 but moderated unevenly thereafter until 2020 - 21. during 2021 - 23, however, it has stabilised around 31. 2 per cent and is showing signs of acceleration. historically, india's investment has been financed by domestic savings, with households being the prime provider of resources to the rest of the economy. in the period 2021 - 23, the gross domestic saving rate has averaged 30. 7 per cent of gross national disposable income. thus, unlike many countries, india does not have to depend on foreign resources, which play a minor and supplemental role in the growth process. in fact, the mirror image of this phenomenon – the current account gap in the balance of payments – has remained modest at around 1 per cent of gdp in 2023 - 24. this provides insulation to the indian economy from external shocks and imparts viability and strength to the external sector. illustratively, india's gross external debt, which is the accumulation of current account deficits over time, is less than 20 per cent of gdp and almost entirely covered by the level of foreign exchange reserves. debt service, i. e., interest and principal repayments are together less than 7 per cent of current receipts. as regards the supersavers – households – there is evidence of switching from financial saving to physical saving, with the latter being financed by accretions to households'financial liabilities. second, the rising growth trajectory on which india is poised is entrenched by macroeconomic and financial stability. after a long and arduous battle with the upside pressures unleashed by the pandemic and geopolitical conflicts, and exacerbated by sporadic onslaughts of food supply shocks, inflation has fallen back into the tolerance band around the target of 4 per cent. this reflects the cumulative impact of steadfast monetary policy actions and supply management. in fact,

it in alignment with productive capacity. analogously, when demand falls below productive capacity, deflationary conditions can develop and hence monetary policy has to boost the economy to restore balance between demand and supply. second, monetary policy has to be forward looking. at any point in time, the information available to monetary policy authorities on the goal variables is lagged – on a measure of economic activity such as gross domestic product ( gdp ) for instance, information 1 / 8 bis - central bankers'speeches available at any point of time is typically three months old, i. e., relating to januarymarch in india ; information on consumer prices in india is available only for may. furthermore, policy impulses travel through the structure of the interest rates with variable and uncertain lags – changes in the policy interest rate take time to be fully reflected in lending rates charged by banks and other financial institutions. so, more often than not, monetary policy has to shoot blind. besides, the goal variables are in motion and hence, monetary policy has to shoot forward. for this purpose, it uses all available information like a radar screen to track the formations of moving goal variables, and target them accurately. this task becomes even more complicated when dealing with their likely course into the unforeseen future such as over the next forty to fifty years. we shall get there presently. third, as jan tinbergen, the 1969 nobel prize winner for economics showed, any policy is most efficient in achieving its goals when it follows an assignment rule - if there is one instrument such as the policy interest rate, there should be one goal. if instead, monetary policy is overburdened with too many goals but is hamstrung with too few instruments, there is every likelihood that the instrument will end up hitting none of the goals. fourth, monetary policy should be conducted in terms of some rule like behaviour that binds it to pursue its goals across time. instead, if it falls prey to the temptation of exploiting short - run trade - offs – like abandoning inflation control in the short run and boosting growth or what economists call time inconsistency – it will ultimately lose sight of its objective because in the short - run pursuit of growth, inflation may be allowed to rise to levels that can be inimically harmful to growth. fifth, modern monetary policy authorities have found that the efficacy of monetary policy is enhanced when it is supported by clear and transparent communication about the intent of policy actions and stance in