might judge the reserve bank on some of the current debates. please allow me the indulgence of defining some such issues. growth - inflation balance 14. the first, and possibly the most important debate, is about balancing between growth and inflation in the policy context. this is a balance that both governments and central banks struggle with. in my view, this debate has been clouded by some oversimplifications. one such oversimplification is to say that governments are for growth and central banks are for price stability. another oversimplification is to assert that there is a tension between growth and inflation, and that one necessarily has to play the trade - off between growth and inflation in policy making. 15. the reserve bank ’ s monetary policy aims at three objectives – price stability, growth and financial stability. to contend that the reserve bank is obsessed with inflation, oblivious to growth concerns, i think, is both inaccurate and unfair. the reserve bank is committed to inflation control, not because it does not care for growth, but because it does care for growth. there is any amount of evidence to show that an environment of low and stable inflation is a necessary precondition for sustainable growth. how history will evaluate the reserve bank on its balanced commitment to growth and inflation is an interesting conjecture. fiscal dominance of monetary policy 16. another big debate today, not just in india but around many countries in the world, is on fiscal dominance of monetary policy. this issue is playing out in a big way in europe today, but it is not new ; nor is it unique to europe. here in india, structural reforms piloted by dr. manmohan singh as finance minister, dr. rangarajan and dr. y. v. reddy in the reserve bank and shri montek ahluwalia as finance secretary have helped establish the autonomy of monetary policy in india, free of fiscal policy compulsions. experience over the last five years has shown that despite that autonomy, the degrees of freedom available for monetary policy management can be constrained by the government ’ s fiscal stance. what will be history ’ s verdict on how we, as an economy, managed this tension between fiscal and monetary policies? managing policy in a globalizing world 17. i am often asked about the challenges for the reserve bank of india on the way forward. looking ahead, one of the big challenges for the reserve bank will be to learn to manage both economic and regulatory policies in a globalizing world. dr. jalan, as

reserve system a currency arrangement ( swap line ) in connection with their us dollar term auction facility ( taf ). under this agreement, two operations with a maturity of one - month amounting to usd 10 billion each were initially conducted, subsequently renewed in january and expanded in mid march to usd 15 billion each, while announcing that the usd funding operation would continue for as long as needed. the taf operations proved very successful, as they met with strong demand from market participants and succeeded in mitigating the liquidity shortages in the global term money markets. 2. 2 second phase of the financial market turmoil : march 2008 - september 2008 the start of the second phase of the turmoil was marked by the rescue of bear stearns by jp morgan with the support of the federal reserve. this event provided a clear example of the potential impact of protracted market illiquidity on funding illiquidity and, ultimately, solvency for individual financial institutions, whose business activities depended in many different ways from the viability and strength of the originate - to - distribute banking business model. such concerns related in the first place to large banks reliant on wholesale markets for the funding of their lending activities. indeed, many large banks had become increasingly dependent on interbank borrowing, both unsecured and collateralised, short and long - term debt, and, as an ultimate line of defence, on the sale of marketable securities rather than on retail deposits, which made them vulnerable to the persisting of disruptions in financial markets. moreover, there was increasing concern that – as the experience of bear stearns had shown – the range of systemically relevant institutions had become broader, so that not only large traditional banks but also non - depository financial institutions, such as investment banks and primary dealers, played a systemic role in maintaining market liquidity in a broad range of unsecured and secured markets. if such institutions faced funding liquidity constraints, market liquidity would be widely affected, with potential negative repercussions for the banking sector and, ultimately, for systemic financial stability. in the euro area the eurosystem reacted to the deterioration in money market conditions by intensifying its provision of euro liquidity to the domestic banking sector and by strengthening its cooperation with the fed in order to expand the supply of usd liquidity to the euro area banks. the focus of the eurosystem during this phase was to support market liquidity as a means of mitigating funding liquidity, ultimately