to higher interest rates and funding costs, there have not been signs of a further sharp contraction in credit from the stress earlier this year that would slow economic activity. though loan balance growth has slowed, banks have continued to increase lending to households and businesses. given the strong economic data and still elevated inflation, i supported the fomc's decision in july to further increase the target range for the federal funds rate. i also expect that additional rate increases will likely be needed to get inflation on a path down to the fomc's 2 percent target. 1 / 2 bis - central bankers'speeches the recent lower inflation reading was positive, but i will be looking for consistent evidence that inflation is on a meaningful path down toward our 2 percent goal as i consider further rate increases and how long the federal funds rate will need to remain at a restrictive level. i will also be watching for signs of slowing in consumer spending and signs that labor market conditions are loosening. it's important to reiterate that monetary policy is not on a preset course. my colleagues and i will make our decisions based on the incoming data and its implications for the economic outlook. we should remain willing to raise the federal funds rate at a future meeting if the incoming data indicate that progress on inflation has stalled. returning inflation to our 2 percent goal is necessary to achieve a sustainably strong labor market and economy. 1 the views expressed here are my own and not necessarily those of my colleagues on the federal open market committee or the board of governors. 2 / 2 bis - central bankers'speeches

to 5. 4 per cent in the current decade ( table 1 ). transformation of the economy is quite apparent from the noticeable changes that have occurred in the sectoral composition of output. the share of services in the national income has steadily increased with corresponding fall in the contributions of agriculture and industry over the years. services sector now accounts for nearly two third of total output as against less than half in the early eighties and the nineties. share of industry declined marginally to 19 per cent from 20 per cent whereas share of agriculture registered steep decline from 38 per cent to just 17 per cent ( annex 1 ). this positive performance seems to be an outcome of reforms encompassing a range of measures that led to transformation spreading over all the sectors of economy. transformation brought in higher degree of sophistication and efficiency in operations of almost all the sub segments of real as well as financial sectors. moreover, domestic economy has become far more integrated with rest of the world which is visible not only in terms of growing trade volumes ; financial flows from and to the outside world have also been steadily growing. there are some experts who argue that india ’ s economic transformation needs to be attributed to change in policy orientation of 1980s rather than the reforms undertaken during 1990s. although they do recognise the possibility that improvement in 1980s might have run out of steam without further reforms undertaken in the nineties ( subramanian, 2007 ). while, academic debate as to what triggered the economic transformation might still be unresolved, there is a near consensus with regard to the important role of liberalisation process initiated in the early nineties in placing the economy on a higher growth path. the economic reforms that ushered in 1991 put forward some important political questions. the first question comes to our mind is about the timing of the reforms i. e. why the reforms were started only in 1991 and why not earlier? how the process of reforms continued despite changes in ruling party at the centre? how the direction of reforms sustained and remained irreversible despite various hurdles and hiccups? the answers to these questions, to a large extent, lie in the transformation in political spectrum of the indian electoral democracy. as one avid follower of india ’ s economy puts it, “ - - - the greatest change in the last 10 years has been in the attitude towards reforms. whereas the vocal supporters of reforms within india were rare during the 1980s, virtually every political party today recognises the need for continued reforms ” ( panagariya, 2008 )