an important tool. with the monetary policy rate close to zero – we cut the interest rate from 8. 25 % to 0. 5 % in less than a year –, communicating that we planned to keep a very low short - term interest rate for an extended period of time. this was essential in keeping medium and long term interest rates low. these measures – as well as some other more exogenous developments such as the rapid recovery of commodity prices – allowed the economy to rebound quite fast from a mild recession in 2009. actually, in the post - crisis years gdp growth was above 5 % in a context of low inflation. over time, these measures were eliminated, but certainly the lessons we learned from the crisis have been incorporated into our policy analysis and toolkit. among the most significant i would mention two : first, the fact that the central bank must be rapid to respond and use all the available tools if necessary. second, that a clearer signal about what we believe will be the path of interest rates in the future helps to have a more efficient transmission of the monetary policy, particularly in turbulent times. in fact, in the more recent period, marked by a higher than normal level of uncertainty associated with both a grimmer outlook for the chinese economy and the normalization of monetary policy in the united states, we have made a special effort to signal the financial market what is the likely direction of our monetary policy in our baseline scenario as well as the risks involved. we have done this by increasing the transparency of our analysis and, especially, by being more precise in our communication. of course it is too soon to make a comprehensive and definite analysis about the costs and benefits of this policy, but in my view this extra amount of forward guidance has been positive in order to achieve a smoother economic adjustment in difficult times. i thank you for being here, and without further delay, welcome to our nineteenth annual conference : “ monetary policy through asset markets : lessons from unconventional measures and implications for an integrated world. ” bis central bankers ’ speeches

also responsible for ensuring financial stability. broadly, one can say that when a country ’ s fiscal position is strong, its capacity to take on the risks arising from the failure of financial institutions is higher. on the other hand, with a weak fiscal situation, the capacity to take care of a financial or banking crisis is rather limited. more important, whenever pockets of vulnerability arise in the financial sector, the headroom available in the fiscal position to provide succour to financial entities needs to be assessed. in this context, one important source of strength as well as vulnerability remains the publicly owned financial institutions, which may have fiscal implications. they contribute heavily as a source of tax revenue. another source of linkage is the cross subsidies and we have to identify the areas of maximum cross subsidies in public sector entities. the sources of indirect subsidies through and by financial intermediaries are also important. a reading of the several budget speeches of the finance ministers in recent years would show the extent to which activities of public sector financial intermediaries operate as instruments of fiscal policy though these entities are competing in the market with private sector on all fronts. these public policy oriented operations of the public enterprises at the instance of fisc seriously limit the efficient price discovery, depth and vibrancy in different segments of the financial markets. thus, it is evident that while analysing the link between the fiscal and the public sector, perhaps, one should not confine to public sector borrowing requirements only. fifth, as regards further reforms in the financial markets, it is very clear that the development of insurance and pension sectors are very important especially for the government debt market and the corporate debt market. however, there are some challenges in this regard. the tax treatment of investment in debt and equity is quite asymmetrical in india with a favourable tilt towards investment in equity. there are limited incentives for encouraging contractual savings. hence, some of the areas that have to be looked at, as we move forward, relate not only to the demand side which advocates development of financial markets, but also to the supply side through policies that promote contractual savings, especially through pension and life insurance funds. now let me move to the fisc and the external sector. fisc and the external sector in the context of the external sector, there are certain issues from the perspective of fiscal policy that are of contextual relevance. the first issue pertains to the opening - up of government debt market to non - residents through, what we may call