fastest growing economies, the engagement between the two countries can be expected to see phenomenal growth in the times to come. 3. the theme chosen for this conference is : india ’ s growing significance in international arena : is it sustainable? are we ready for it? these are interesting and important issues and as we shall see, quite relevant to our common functional domain. now, importance in the international sphere has many dimensions : cultural, military, moral, strategic to name a few but the dimension that underpins all others is economic. if you look at the history of mankind, it is economic prosperity that has always dictated the importance of a nation. whether we look at the italian city states of the 15th / 16th century – many of shakespeare ’ s plays were situated in these places verona to venice – and one wonders whether the renaissance would have been possible but for the wealth and backing of the medicci ’ s and others, or the british of the 18th / 19th century – britain became the dominant global power for two centuries, and english became the lingua franca, it is the economic prosperity that made the nations internationally important. the preeminence of china today is to a great extent due to its phenomenal economic success. 4. we also must notice that economic prosperity has almost always been inextricably linked with international trade and commerce ( capital movements are recent phenomenon ). the need for free trade and commerce became important as the industrial revolution greatly increased productivity. of course, it was not in the sense we now understand. till middle of the nineteenth century, mercantilism was the dominant policy driver in europe. essentially, while it favoured 1 / 6 bis central bankers'speeches exports of all commodities except gold, it sought to discourage imports through tariffs. ultimately, with repeal of the ( british ) corn laws in 1846, the case for free trade had been decisively established. the doctrine that free trade enhances welfare has been further strengthened by subsequent research at least at a theoretical plane. despite the fact that global economic growth and growth in global trade have moved in tandem over the past two centuries, arguments in favour of import substitution, selective protection, subsidies abound. one can perhaps reasonably conclude that while the global objective will continue to be less restrictive trade, local variations will have to be considered keeping in view other macroeconomic factors like fiscal policy, exchange rate policy, employment policy, and so on. 5. unlike trade in goods and services, the case for capital flows has

sector, the report of which was submitted in 2009. 9. the cfsa made an assessment of indian accounting and auditing standards and came up with some key recommendations that proved critical for the institute. the report, inter - alia, suggested convergence with ifrs at the earliest and creating awareness among auditors and others involved in the process to ensure that systems and procedures are in place to comply with the ifrss. another important recommendation is that india should contribute significantly in the agenda setting of the iasb and its technical output. the challenge before the institute is to take this up in right earnest by identifying persons with requisite competence to participate in global forums, the benefits of which will flow to the profession at large. accounting issues in the context of the financial crisis 10. the global financial crisis and the consequences thereof exposed some weaknesses in the accounting and auditing aspects. during the course of my presentation here i would like to place before you some issues relating to financial reporting in the context of financial stability. 11. there was widespread criticism that certain accounting practices either contributed to or at the very least, exacerbated the severity of the crisis, in view of its failure to deal with illiquid markets and distressed sales. the g20 working group on “ enhancing sound regulation and strengthening transparency ”, in which i had an occasion to work actively, recommended that accounting standard setters should strengthen accounting recognition of loan loss provisions by considering alternative approaches for recognizing and measuring loan losses that incorporate a broader range of available credit information. accounting standards setters and prudential supervisors were advised to work together to identify solutions that are consistent with the complementary objectives of promoting the stability of the financial sector and of providing transparency of economic results in financial reports. 12. g20 report also recommended that the iasb should enhance its efforts to facilitate the global convergence towards a single set of high - quality accounting standards and also opined that accounting standard setters should accelerate efforts to reduce the complexity of accounting standards for financial instruments and enhance presentation standards. these recommendations together with the recognition within the accounting and audit profession that there were certain drawbacks in the current standards has necessitated large scale revision of various standards especially those relating to financial instruments and fair value accounting. during the global financial crisis, the international accounting standards board ( iasb ) and the us financial accounting standards board ( fasb ) established a financial crisis advisory group comprising senior leaders with broad international experience to bis central bankers ’ speeches address accounting issues emerging from the global crisis.