and developing national and global architectures to enhance the benefits of globalisation while containing the risks, therefore, represent a major challenge for the policy makers. every financial crisis, notwithstanding the associated ravages, has to be also seen in terms of the opportunities it offer like exposing the limitations of the existing systems, cleansing the financial systems of activities and markets entities that work towards misuse of the systems for maximizing personal returns, and certainly in this process open up new business opportunities. i would like to share with you certain important aspects of the crisis, before sharing with you the indian experience in terms of the impact of the crisis and the way forward. the genesis of the crisis the sudden manifestation of the crisis in 2007 was the result of two important fundamental macroeconomic imbalances that persisted for too long ; one, the monetary policy of the fed reserve in the greenspan era and second, the growing global imbalances. both these factors were clear precursors of unsustainable bubbles, which were ignored in general because of the pre - crisis phase of high global growth with low inflation. growing bubbles the fed ’ s monetary policy stance before the crisis created the general impression over time that the interest of capital in a free market economy can never be at risk. that encouraged the use of high leverage as a source of sustainable high profits from bubbles. fed ’ s monetary policy has widely been highlighted by now for its role in supporting the growth of two most unpleasant things – speculation and leverage – which in turn contained the potential for a severe financial crisis. the global imbalances the safe haven appeal of the us dollar as the key international currency, and the assured high return on financial investment in the capital market in the us during the greenspan era led to a situation where the us continuously maintained large and growing unsustainable current account deficits. countries around the world with current account surpluses or large foreign exchange reserves kept investing in the us. despite the crisis, and the resultant forced correction in imbalances to some extent, this global problem could persist even after the crisis. the buildup to the crisis - role of more proximate factors leverage use of leverage merged as the sure means to maximize income in the us economy. american household and corporate debt had increased significantly before the crisis. one recent university of chicago study highlights how the size of household debt and house prices moved together in the us, and every increase in house prices induced further growth in debt for consumption purpose. for every one

two years or more, infrastructure has been the largest contributor to growth in bank credit. this has given rise to some problems, which i shall address in the next section, but, it is a reassuring sign that new infrastructure capacity is being created. as the supply - demand gaps in a variety of sectors close, the stress that they impose on industrial investment will ease. conditions will be created for new industrial capacity to be created, unburdened by uncertain or high - cost infrastructure services. this, in turn, should facilitate the movement of workers from relatively low - productivity agriculture to relatively high - productivity manufacturing, provided that the policy framework indicated in the human capital discussion are put into place. however, the urbanization scenario raises concerns. if the ultimate goal of sustained growth is to create enduring improvements in the quality of life of as many people as possible, this is not going to be achieved if urban systems do not keep pace with the number of entrants. fortunately, there are a number of initiatives in place that at least provide the prospect for the needed improvement. these are both top - down and bottom - up approaches. the jawaharlal nehru national urban renewal mission ( jnnurm ) is the primary example of the former, in which the central government provides resources for urban investments, subject to explicit accountability standards as well as resource commitments by city governments. in the bottom - up category, many cities have launched initiatives to digitize their land records, which immediately enhance the capacity to collect property taxes, always a significant source of revenue for cities. simplification of tax formulae and procedures is another aspect of urban governance reform. rationalization of user charges for civic services, the use of private agents to provide some services, e. g., waste management and so on are all ways in which cities are going about the task of improving service delivery to their current residents as well as creating the capacity to do so for newcomers. as reassuring and promising as all these programmes and initiatives are, they do not seem to be at a scale matching the enormity of the challenge. a significant restructuring of urban governance framework, which helps build the capacity to meet the challenge, is therefore a reform priority in this domain. there is plenty to learn from the experience of other countries where the quality of urban environment is noticeably superior to that in india. some broad guidelines may include, for example, greater powers to tax with a consequent decrease in the dependence on higher tiers of government