has been made towards correcting imbalances, further efforts are desirable - with every country doing its part - to help reduce medium - term risks associated with the imbalances. the us will have to try to curb household and government borrowings and strengthen national savings, without hurting recovery and excessive dollar depreciation. the focus of fiscal consolidation in the us has to remain on the expenditure side, though revenue measures aimed at broadening the revenue base and tax system with greater emphasis on consumption tax rather than income tax cannot be ruled out ( weo, september 2006 ). with the housing market slowing down in the us, some increase in private savings is expected. this will be further helped by policy initiatives such as introduction of health savings accounts that would raise incentives for household savings and passing of pension legislation. the euro area needs to pursue structural reforms, especially product and labour market policies, to boost domestic demand and broad base the recovery. japan has started recovering finally. its current account surplus has begun to narrow down from 3. 8 per cent of gdp in 2004 to 3. 6 per cent of gdp in 2005 and the trend is continuing in 2006 with domestic demand strengthening. it is widely agreed that japan should further strengthen its financial system and carry out other structured reforms to provide further flexibility in the economy. further flexibility in exchange rate policies is desirable for the emerging market economies. any attempt by emes to intervene excessively and sterilize their forex reserves to maintain their competitiveness will further delay the adjustment process. however, as indicated earlier that unless there are substantial changes in exchange rates, it seems that one cannot expect corrections to global imbalances. studies have shown that with unchanged growth rates in the us and the rest of the world, the us dollar would need to depreciate by nearly 33 per cent - equivalently, the non - us currencies would have to appreciate, on average, by 50 per cent - to balance the us trade account ( obstfeld and rogoff, 2004, 2005 ). another study has pointed out that dollar should depreciate by 30 per cent in real terms to bring us cad within 2 per cent ( mussa, 2004 ). promoting efficient absorption of higher oil revenues in oil - exporting countries with strong macroeconomic policies should also be a key element of this correction mechanism. it is suggested that these countries could boost expenditures to some extent in areas where social returns are high like education, health, infrastructure and social security.

professionals, bringing in rich and diverse perspectives for students. role of economists / researchers in shaping policy 4. in keeping with the occasion, let me say a few words about economists. their vital role in shaping public perceptions and discourses and in designing strategic policies in the corporate sector, central banks, governments and multilateral institutions, is more often than not unsung. rigorous research and training helps in formulating informed set of policy choices and consequent decisions. in the domain of public policy, we have to distinguish between the direct and the indirect impact that economists can make. the former is what we usually think of when we consider how experts might affect formulation of a policy, say, minimising the subsidy burden on the exchequer. however, their greatest contribution to policymaking may take place through less direct routes such as through their research by nudging policymakers to think about economic problems / challenges in newer / different ways. 5. policy makers too have a crucial role in creating an enabling environment for economists to contribute to society. in this context, the government of india has to be lauded for instituting three land mark reforms in recent years. one cannot and page 2 of 6 should not underestimate the sagacity and uncommon courage of the government to undertake reforms that can only be described as truly transformative. these will shape, for the better, our economic evolution in the years and decades to come. 6. in 2016, the government legislated amendments to the rbi act to invest the reserve bank of india with the specific mandate to operate the monetary policy framework of the country whose primary objective is to “ maintain price stability while keeping in mind the objective of growth ”. this was a fundamental shift in the institutional architecture for the conduct of monetary policy, with the formal transition to a flexible inflation targeting framework and the relinquishing of the monetary policy decision by the governor to a six member monetary policy committee ( mpc ). another momentous reform is the establishment of the gst council whereby the government of india has created one of the most effective institutional mechanisms for cooperative federalism. along with the state governments, it has offered a refreshing counter - narrative to the divisive course of the international federal dialogue, voluntarily choosing to relinquish and then pool sovereignty for a larger collective cause. also, the enactment of the insolvency and bankruptcy code, 2016 ( ibc ) is a watershed towards improving the credit culture in our country. the ibc provides for