hundreds of new low - price stores in one year. the very nature of these forecasting errors is important to the way we assess the consequences. as employment has been weak during this economic upswing, and total unemployment is at a high level, many debaters have emphasised the link between low inflation and the labour market. they wish to imply that demand in the economy is insufficient because of an excessively tight monetary policy. but this is hardly the case ; all of the effects the forecasters have underestimated are supply effects, which reduce inflation because of better and more efficient conditions for production, and not effects that reduce demand. what we are seeing is the reverse ; that the expansionary monetary policy has a fairly tangible impact. low interest rates are leading to unusually rapid growth in lending and to a rise in asset prices. companies have ample liquidity and thereby good scope for investment. nevertheless, employment is responding very slowly – instead of employing more staff, employers are using their existing labour more intensively and efficiently. there are parallels here to what we have seen in the labour market during previous years in the similarly it - intensive united states, where employment has increased with a lag relative to the cyclical upswing. this is because employers have initially pushed their organisations to the limit and got the most out of their earlier heavy it investment before resorting to new recruitment. given the intensive global competition and considerable scope for outsourcing operations, the labour market is constantly undergoing change with new opportunities for rationalising organisations. many people are moving from an increasingly labour - scarce manufacturing sector to a service sector that is also rationalising. data show that few of the sectors cutting staff in an economic downswing begin re - employing when economic activity improves again. the redundant employees are instead forced to move on to other occupations. the swedish labour market appears to find it difficult to meet these structural changes. the major differences in unemployment between regions and between professions indicate that there is less mobility in the labour market than there could be and that few people are finding new job opportunities in new sectors or new locations. at the same time, the labour market has been affected by changes both within the eu and in the world economy as a whole. asia is rapidly expanding production and exports and reduced trade barriers are increasing the degree of competition even in markets that were not previously exposed to competition. the emancipation of the countries in eastern and central europe has dramatically increased access to labour for manufacturing in these countries and also for work in sweden.

a percentage of gdp is high, currently at around seventy five per cent. it is also useful to note that there are several unique features of management of public debt in india, which imparts overall stability to macro - economy. first, states have no direct exposure to external debt. second, almost the whole of public debt is local currency denominated and held almost wholly by residents. third, public debt, of both centre and states is actively and prudently managed by the reserve bank of india ensuring comfort to financial markets without any undue volatility. fourth, the government securities market has developed significantly in recent years in terms of turnover, depth and participants, and significant further improvements are underway. fifth, most debt carry fixed coupons and not indexed to inflation. sixth, the government has not ventured into sovereign marketable debt issues in foreign currency. seventh, contractual savings supplement marketable debt in financing the deficits. finally, direct monetary financing of primary issues of debt has been discontinued since april 2006. hence, the high stock of public debt relative to gdp as also the relatively higher fiscal deficits in the past have not been a matter of concern as far as stability is concerned. however, it is recognised that the long - term sustainability as well as further liberalisation of the external and financial sectors, to foster growth momentum, would call for further reduction of both debt and deficits to prudent levels. financial sector reforms the indian financial system of the pre - reform period, before 1991, essentially catered to the needs of planned development in a mixed - economy framework, where the government sector had a predominant role in economic activity. interest rates on government securities were artificially pegged at low levels, which were unrelated to the market conditions. the system of administered interest rates was characterised by detailed prescriptions on the lending and the deposit side, leading to multiplicity and complexity of interest rates. as would be expected, the environment in the financial sector in those years was characterised by segmented and underdeveloped financial markets coupled with paucity of financial instruments. consequently, by the end of the eighties, directed and concessional availability of bank credit to certain sectors adversely affected the viability and profitability of banks. thus, the transactions between the de facto joint balance sheet of the government, the reserve bank and the commercial banks were governed by fiscal priorities rather than sound principles of financial management and commercial viability. it was then recognised that this approach, which, conceptually,