or institutions in trouble can buy valuable time. but that time will prove valuable only if it is used to tackle the underlying problem. after the crisis began, it took a year before governments in europe and the united states were persuaded that the problems of their banking sectors resulted not from a shortage of liquidity – that was merely the symptom – but from massively over - leveraged balance sheets. eventually, in october 2008, banks were recapitalised, albeit, especially on the continent, inadequately so. but the underlying problems of excessive debt have not gone away. as a result, markets are now posing new questions about the solvency of banks, and indeed of governments themselves. what were the causes of the unsustainable build - up of debt in europe and elsewhere? they lay in the continuing imbalance between those economies running large current account surpluses and those running large current account deficits. persistent trade surpluses in some countries and deficits in others did not reflect a flow of capital to countries with profitable investment opportunities, but to countries that borrowed to finance consumption or had lost competitiveness. the result was unsustainably high levels of consumption ( whether public or private ) in the united states, united kingdom and a range of other advanced economies, and unsustainably low levels of consumption in china and other economies in asia, and some advanced economies with persistent trade surpluses, such as germany and bis central bankers ’ speeches japan. the burden of debt will go on rising in the former group of countries until these spending patterns adjust and the latter group will find their loans eventually repaid in depreciated currencies, if at all. surplus countries, a group which includes three of the world ’ s largest four economies, share a major responsibility to respond to our present dilemma by expanding domestic demand. by importing more they would provide deficit countries with the wherewithal to export and service debt repayments. when the crisis hit, the starting point was the need for a substantial rebalancing of demand and a repayment of debt. in the deficit economies, there was an inevitable tension between the short run need to stimulate demand to prevent rising unemployment and falling inflation, and the long run need to rebalance demand and reduce indebtedness. in january 2009, i described this as “ the paradox of policy … almost any policy measure that is desirable now appears diametrically opposite to the direction in which we need to go in the long term

shaktikanta das : reserve bank of india @ 90 commemoration welcome address by mr shaktikanta das, governor of the reserve bank of india, at the reserve bank of india @ 90 commemoration function, mumbai, 1 april 2024. * * * hon'ble prime minister, hon'ble governor of maharashtra, hon'ble finance minister, hon'ble chief minister of maharashtra, hon'ble union ministers of state for finance, hon'ble deputy chief ministers of maharashtra, distinguished invitees, media representatives, and my colleagues from the reserve bank, past and present. today, the reserve bank of india enters the 90th year from its establishment on april 1, 1935. the journey of the reserve bank over the last nine decades has been one of efficient functioning and contribution to the nation's progress. on this momentous occasion, it is my proud privilege on behalf of the reserve bank, to welcome the honourable prime minister to this commemorative event. sir, your presence here amidst your busy schedule is a source of great inspiration for all of us. i also welcome the honourable finance minister, who has been a source of support and guidance. further, i welcome all the distinguished dignitaries on the dais and all our invitees who have made it convenient to be here today. the reserve bank's evolution as an institution has been closely intertwined with the development of the indian economy. from being a central bank primarily concerned with allocation of scarce resources during the planning period, the reserve bank has transitioned into being an enabler for the market economy. we are a full - service central bank with our functions spanning multiple dimensions. it has been our endeavour to promote a financial sector that is robust, resilient and future ready. the path - breaking structural reforms, such as the enactment of the insolvency and bankruptcy code ( ibc ) and the adoption of flexible inflation targeting in the recent years, have helped us to deal with the challenges in the banking system and the task of maintaining price stability more effectively. given the rapid changes taking place in today's world, especially in the areas of technology, innovation, business practices and growing complexities in the financial sector, the reserve bank is constantly evaluating the emerging trends and taking necessary policy measures to remain in sync with the evolving situation. our effort is to anticipate situations and take proactive action. the global turmoil arising from the covid - 19 pandemic and the ongoing geopolitical