later, by more. so we raised interest rates through the second half of last year - and again in june - trying, as best we could through our tactics, to minimise any further unwanted upward pressure on sterling. but things have now clearly moved on. the outlook for the world economy deteriorated further through the summer under the impact of a series of new shocks. japan, the world ’ s second largest economy, slipped further into recession. russia - which had only weeks earlier embarked on an imf program - saw the collapse of the rouble and default on its debt. and acute nervousness spread through many of the world ’ s financial markets. although there has been some improvement in sentiment over the past month or two, and although the us and european economies continue to expand, the likelihood remains that world economic growth will be significantly slower than had been expected earlier in the summer. slower growth of world activity is bound to prolong the restraining external effect on growth and inflation in the uk, even though the exchange rate has now started to weaken. at the same time there are also now clearer signs of overall slowdown in our own economy. the evidence for this is less obvious in the backwards - looking economic and monetary data than it is in the forward - looking surveys, but even so the data suggest that we are beginning to see an easing of pressure, including an easing of pressure in the labour market. and the surveys themselves now point to a slowdown in service sector growth, including retail distribution, as well as a sharper decline in manufacturing output. this prospect is consistent with the reports which we receive directly from the bank ’ s network of regional agents and their 7000 - odd industrial and commercial contacts around the country. of course we pay very careful attention to this forward - looking evidence of developments in the economy alongside the data, and, like others, we have revised down our forecasts for output growth and inflation. and we have eased monetary policy quite sharply in the past two months, in the light of that evidence. our current best guess - published in last week ’ s inflation report is that, after the interest rate cuts, the growth of overall output next year will be around 1 %, picking up through the millennium to around trend in the second half of the year 2000. meanwhile, we expect underlying inflation to remain close to the target rate of 21 / 2 % - though perhaps a little above that rate during the course of next year. now no - one likes to see the

pass out as alumni from a venerable institution. while the edi commenced its capacity building initiatives in 1983, we must not forget that its genesis dates back to 1969. the late 1960s were a period when india undertook brave experiments to use credit as an instrument of development. in fact, entrepreneurship and credit are interrelated. the most important and perhaps the most significant amongst the public policy moves in this direction were the experiments to do away with guarantees and collateral and move from “ security based lending ” to “ purpose based lending ”. the entire development of entrepreneurship would not have been possible if this transition had not taken place. 4. the underlying thoughts in this policy intervention were that credit and finance were instruments of empowerment. by unfettering credit from security, those who were able and willing, creative and talented would not be constrained by lack of funds. the security for the funds lent would not be physical assets but the discounted value of cash flows that the enterprise would generate. this marked a decisive shift in methods of lending – it reoriented lending from a static to a dynamic concept. moreover, it was centred around people – the living entrepreneur rather than on inanimate physical capital. my present organization, rbi, plays a very significant role in this change. 5. such a policy shift was rooted not only in equality of opportunity which is enshrined in the indian constitution and the need to provide employment, but, most importantly, it was rooted in the belief that it is talent and not necessarily capital that can make the difference ; in bis central bankers ’ speeches the belief that resourcefulness and not merely resources matter. the key to india ’ s development, thus, lay in unleashing the latent entrepreneurial potential of the country – the critical aim was to free those with talent and ideas from capital constraints. we had various problems but we were unleashed in the 1990s after a wait of 30 years. 6. entrepreneurship and finance alone are not sufficient. conducive conditions are needed for entrepreneurship to thrive. to create a nurturing ecosystem conducive to building business, a host of policy measures have been put in place by central and state governments, rbi, and other institutions. these include creating infrastructure – financial institutions to lend, institutions to assist with technical skills development, assistance with technological up - gradation, marketing, consulting, as well as capacity building in the form of entrepreneurship development programmes. i will be taking up some of these aspects which will be of help to