) its exchange rate must be determined by market forces of supply and demand ; ( c ) a significant portion of the world trade must be invoiced in the aspiring reserve currency ; ( d ) in order to enjoy the exorbitant privilege of issuing the reserve currency, the issuing country must accept the “ exceptional responsibility ” of maintaining sufficient liquidity in the currency ; ( e ) its financial markets must be open, deep and robust ; ( f ) the policies of the country must inspire trust and confidence. china and india 11. i believe i have raised a lot of questions. but let me conclude with some thoughts on india - china comparison which has almost become a national obsession. 12. for us in india, china means many things – an object of envy, a challenge and an inspiration. 13. note that in 1700, india, with a population of 165 m, was the world ’ s largest economy, followed by china with 138 m people. even a century later, in 1820, as industrial revolution was gathering pace, india and china accounted for half of world gdp. the pecking order completely changed after that. china and india got relegated to the bottom of the league of nations. and over the last 25 years, we are fighting our way back up. 14. but china is ahead of us by miles. china is already a low middle income country, whereas india is still a low income country and home to the largest number of poor people in the world. as recently as 1990, india was 30 places ahead of china in the global competitiveness index. we are now 30 places behind china. as recently as 2000, there was at least one indian university / institution in the top 100 global institutions while china had none. today china has five and india has none. as measured by patents registered or research publications, china is moving up, and india is moving down. 15. i am making this comparison not so much in despair, but to trigger some introspection about what india should do to regain the glory that we enjoyed as the world ’ s pre - eminent global power 300 years ago. china has demonstrated what is possible. to that extent china is an inspiration. the task for us in india is to match up to that record, or even surpass it, but by doing it the indian way. 16. i am sure listening to arvind about china ’ s rise to the top will answer many of these questions and also provide us answers for our own way

david dodge : monetary policy and inflation targets in canada opening statement by mr david dodge, governor of the bank of canada, before the standing senate committee on banking, trade and commerce, ottawa, 29 november 2001. * * * malcolm and i are pleased to appear before this committee. we hope that we will be able to do so, on a regular basis, in the future. today, i would like to start our discussion by spending a few minutes explaining how we at the bank of canada go about setting monetary policy. the bank has a commitment to contribute to the economic well - being of canadians. this means that we must conduct monetary policy so that it fosters sustained solid economic growth. as i said to you last march, the unique contribution that monetary policy can make to good economic performance is to preserve confidence in the future value of money. when people can count on their central bank to keep inflation low, stable, and predictable, they can make sounder economic decisions. the bank pursues low inflation within a framework based on an explicit inflation target, supported by a flexible exchange rate. the current target is to aim at the 2 per cent midpoint of a range of 1 to 3 per cent over the medium term. i say “ over the medium term ” because monetary policy actions take time to have their effects on the economy and on inflation. some effects are felt fairly quickly. but the full impact on inflation can take up to 18 to 24 months. so, in setting monetary policy, we have to look ahead and make judgment calls about future economic developments and about the timing and final outcome of any actions we take today. since their adoption in 1991, inflation targets have proven very effective in keeping inflation low and in anchoring people ’ s inflation expectations. they have also provided the bank with a useful mechanism for assessing and dealing with demand pressures on future inflation in a way that helps to keep the economy on a more even keel. let me explain how the inflation targets work to guide monetary policy and to allow the bank to help stabilize the economy. at any point in time, there is a certain level of output that an economy can produce without putting either upward or downward pressure on inflation. economists refer to that level of output as “ potential output ” or “ production capacity. ” the level of potential rises over time as more workers join the labour force ; businesses increase their investments in new technology, machinery and equipment ; policy measures are taken to make product and labour markets more flexible ; and all of us