india ’ s external trade in goods and services as a percentage of gdp is more than that of the united states ( at 48 per cent and 29 per cent respectively ), and is, in a way, indicative of the extent of india ’ s trade integration with the global economy. india is fully convertible on the current account, but we do have requirements of repatriation and surrender of export earnings to ensure that capital account transactions do not take place under the guise of current account. capital account is almost fully open to non - residents, well regulated financial institutions, and corporates. in regard to residents, capital account is almost fully open to resident corporates and partially open to individuals and financial intermediaries. in brief, we partner with the global economy fully on the trade and the current account while there is progressive liberalisation of the capital account, consistent with the progress in reforms in the real, fiscal, and financial sectors. the current turbulence in financial markets and institutions – particularly in the usa, has raised enquiries about the possible contagion. the money, government securities and foreign exchange markets have been stable in india and, in our view, they may not be vulnerable in terms of direct and first - round effects. however, the indian equity markets, which often reflect global trends, have been volatile in the recent months and that has some impact on changing sentiments. we have a bank - dominated financial sector, and banks have a strong capital base. in response to the global developments and the rapid growth in money supply, credit, and asset prices in india, we have since 2004 increased, in regard to banks, the risk weights and the provisioning requirements, and decreased or rationalised the exposure limits to select sectors. these were combined with prudential stipulations on off - balance sheet items and relationships between banks and non - bank finance companies. several safeguards have been built in terms of prudential guidelines and access to repo markets to guard against liquidity - related problems to banks. above all, withdrawal of monetary accommodation commenced in 2004 and has been gradually fine - tuned, remaining sensitive to early signs of overheating, while related prudential measures were addressing exposure of banks to risks in assets. hence, in our assessment, the indian financial sector is likely to be less affected by the contagion than most other emes, in respect of first - round or direct effects. a few words about the state of the indian real economy may be in

in fact, we are a unique federation where the boundaries of existing provinces are redrawn and new provinces are created, to accommodate aspirations, while remaining strictly within the provisions of the constitution. we have several national languages in which governments ’ businesses are conducted. every currency note that you see in india has the denomination written in seventeen languages with different scripts. in brief, independent india believes firmly, in dialogue, accommodation and assimilation of multiple identities of people. these characteristics enable the indian people and the indian corporates to live and work harmoniously alongside other nationalities. india ’ s record as a responsible nation in honouring its commitments is well known. specifically, independent india has never reneged on its monetary obligations to the rest of the world and has not sought any noticeable rescheduling of its payment obligations. in 1991, we had a liquidity crisis in currency, mainly due to the war in iraq and the breakdown of trade with ussr, but we preferred to pledge gold, initiate a massive import compression and start a reform process with assistance from the imf and the world bank. the entire burden of crisis and adjustment was successfully borne by the domestic economy. in the current environment of financial turbulence, and also a possible unwinding of macro imbalances, india plays a stabilising role with a modest current account deficit in most of the recent years, at around one per cent 1 of gdp, and a market determined exchange rate. india has not been contributing to the global macro economic imbalances, though it has a stake in how the issues get resolved in the near future. currently, there is a debate on the role of sovereign wealth funds. india is in receipt of investments from several of them either directly or indirectly, and hence, is interested in the current debate. for its part, the country ’ s foreign exchange reserves amounting to about us $ 300 billion continue to be managed by the reserve bank of india, typically as per mandate similar to those of other central banks around the world and consistent with the imf guidelines. however, the indian corporates, based on account of their own commercial judgements, take investment positions and merge or acquire other undertakings in other countries. public policy neither provides incentives nor disincentives for such market based initiatives by the indian corporates. india ’ s external sector has displayed considerable strength and resilience since the reforms in 1991 – despite several domestic as well as global political events and supply shocks in food and fuel. interestingly,