duvvuri subbarao : india – managing the impact of the global financial crisis speech by dr duvvuri subbarao, governor of the reserve bank of india, at the confederation of indian industry's national conference and annual session 2009, new delhi, 26 march 2009. * * * introduction less than a year ago, much of what has happened in the indian economy since last october would have been hard to anticipate. i recall, around this time last year, the most frequently asked questions ( faqs ) were, what are the factors that put india on a high growth trajectory and what can we do to remain there? today, the faq is, when and how do we get back on to the high growth trajectory? the sharp turn around in the faqs summarizes in a nutshell the impact of the global financial crisis on india. global outlook the global economic outlook deteriorated sharply over the last quarter. in a sign of the ferocity of the down turn, the imf marked down, yet again, its estimate for global growth in 2009 to a range of ( - ) 1. 0 to ( - ) 0. 5 per cent, the first global contraction in 60 years. with all the advanced economies – the united states, europe and japan – having firmly gone into recession, the contagion of the crisis from the financial sector to the real sector has been unforgiving and total. recent evidence suggests that contractionary forces are strong : demand has slumped, production is plunging, job losses are rising and credit markets remain in seizure. most worryingly, world trade – the main channel through which the downturn will get transmitted on the way forward – is projected to contract by 2. 8 per cent in 2009, the fastest pace of shrinkage in the last 80 years. policy making around the world is in clearly uncharted territory. governments and central banks across countries have responded to the crisis through big, aggressive and unconventional measures. there is a contentious debate on whether these measures are adequate and appropriate, and when, if at all, they will start to show results. there has also been a separate debate on how abandoning the rule book, driven by the tyranny of the shortterm, is compromising medium - term sustainability. what is clearly beyond debate though is that this great recession of 2008 / 09 is going to be deeper and the recovery longer than earlier thought. decoupling hypothesis and emerging economies contrary to the

v k sharma : genesis, diagnosis and prognosis of the current global financial crisis address by shri v k sharma, executive director of the reserve bank of india, at the senior management conference, mumbai, 21 november 2008. the views expressed are those of the author and not of the institution with which he is associated. * * * i heartily welcome you all to the senior management conference 2008. as at the time of the last senior management conference, the now 14 - month old, and still ongoing, global financial market convulsion, with no hint even now of its cataclysmic denouement, and its recent direct outcome, the widespread global economic slowdown, provide, again, the perfect backdrop, and contextual topicality, to this year's conference theme " financial sector development in india : agenda for rbi in the next 5 years ". while in my address last year, i had identified broad spectrum and generic failure of an inertial regulatory and supervisory system as being the genesis of the crisis, this year, i propose to briefly review its evolution since, and make a modest attempt at the prognosis of, and lessons from, the crisis. as we are aware, since the onset of the global financial crisis, the worst since the great depression, the typical stock policy response has been to dramatically and aggressively cut interest rates and inject ever increasing doses of liquidity, giving the impression that the crisis was diagnosed to be liquidity - genic when, in fact, it was fundamentally, asset toxicity - genic. the latest data indicate that the fed, ecb, the bank of england, the bank of japan and swiss national bank have together injected usd 2. 74 trillion in outstanding amount of liquidity. it may not be entirely fortuitous / coincidental that the estimates of total potential write - downs and losses which range from usd 1. 5 to 2. 5 trillion also roughly match the amount of central bank liquidity outstanding! in this context, the popular refrain that banks are continuing to “ hoard ” liquidity borrowed from central banks, and which is why 3 month libor – ois spreads continue to remain elevated, is a myth for no bank will ever countenance a negative spread which will do no more than burn a bigger hole in its capital / balance sheet. perhaps, the logical reason for this is that even after having written down a whopping usd 965 bn. of assets, and having raised usd