current account surpluses are absorbed in the region itself. this process of demand generation would help in orderly correction of the global imbalances eighth, one wonders whether there is a dissonance between the perception of financial markets and that of the policy makers in regard to global imbalances. the policy makers appear to give some signals of concern, but the response of the financial markets is often out of alignment with the signals. interestingly, anecdotal evidence shows that analysts in financial intermediaries are sensitive to the downside risk of imbalances, but the conduct of the participants does not reflect the awareness. no doubt, this sense of dissonance is not new, as for example, stock markets went up after mr. alan greenspan ’ s statement regarding irrational exuberance. if such dissonance is true, and persists, what would be the effectiveness of public policy initiatives? ninth, is there an advantage in assessing the non - quantifiable factors to explain the persistence of what has been stated as a stable disequilibrium to describe the current status of the global economy? for example, signature value of united states in terms of confidence of financial markets as a lasting safe - haven status could be a factor, though the issue is whether it will be valid interminably. the perception of continuing productivity gains in the us due to its proven flexibilities could be another. lack of alternatives to deploy global savings, which are expanding may also be relevant. no doubt, these are not quantifiable, but do not cease to be relevant for analysis and assessment. finally, is it possible that there are several intermediate scenarios between orderly adjustments and disruptive or disorderly adjustments? a series of marginal adjustments, often in spurts, could take place which may appear random, but move towards gradual lessening of imbalances through an interactive and iterative processes encompassing markets, national policies and global cooperation. the agenda for analysis proposed here may facilitate exploration of such intermediate scenarios of unwinding global imbalances. conclusion to conclude, the performance of the indian economy since 1980, and in particular since the reforms in the 1990s, is in many ways an impressive success story both in terms of growth and stability. the indian economy has responded well to the rising global competition with gradually increasing integration with the world economy. the current high growth phase of the indian economy is also coinciding with rising domestic saving rates. while india by itself hardly contributes

imbalance. there are some indications that the oil surpluses are being deployed in more diversified avenues than official reserves. oil exporters appear to have taken advantage of emerging investment opportunity in stock markets and real estate. such inflows could have helped to keep long - term interest rates as also emerging market bond spreads low, even as policy rates are rising. an interesting issue would be the nature of their responses to unwinding of global imbalances. fourth, in a way global imbalance is a reflection of incomplete globalization. if there were complete globalization, the surplus in saving of one country could be utilized by a country which has deficit in saving as it happens among different states in india or the us. it could be argued that as the global economy integrates further, the resolution of the global imbalances might be smoother. fifth, what is the evolving role of viewing exchange rate regimes in influencing domestic economy? it is argued by some that the emerging evidence indicates that domestic price movements remain somewhat immune to considerable exchange rate movements. if so, the possibility of bringing about global rebalancing through exchange rate adjustment by itself may not be very encouraging. no doubt exchange rate would have an important role to play in global rebalancing, but the issue is its relationship with other components of the whole package like saving – investment, fiscal deficit, raising investment, structural reforms and domestic output as well as employment. the linkages among the various components described here could be very country specific. sixth, there is wide diversity among the asian economies in terms of saving and investment rates, fiscal deficit, drivers of growth ( domestic versus external demand ) and the degree of flexibility in their exchange rates. thus, it may be difficult to treat all of them as contributing to global financial imbalances, in the same manner, nor would all the asian economies be identically affected by the adjustment of global financial imbalances. correspondingly, the policy response of each country to the issue would be tailored to the circumstances. more importantly, with growing integration among asian economies, how would the process of rebalancing affect them depending on the manner in which dominant economies in asia manage the process? seventh, our prime minister, professor manmohan singh has suggested that given the potential for investment demand in the region, we must find ways of making better use of savings and finding investment avenues within the region. in this regard, an important issue would be generation of demand within the region so that the aggregate