with supply constraints, were showing up in inflation ( as measured by the wholesale price index ( wpi ) ), ruling above 6 per cent through the preceding quarter ( january - march, 2007 ). consumer price inflation was even higher. there was also expectation internationally at that time that the global economy was moderating after unusually high growth in the last few years. however, some volatility had been observed in international financial markets and there was some expectation of repricing of risks, and its potential effects on financial markets. overall, while prospects for growth continued to be favourable, monetary authorities around the world were showing an inclination to be watchful about risks to price and financial stability. by late july, while the evolution of macroeconomic and financial developments was broadly on track, with some upward revisions about growth prospects, there are some incipient shifts taking place in sentiment, liquidity and market conditions, particularly in the presence of some volatility in financial markets. policy responses of central banks across the world have acquired a tone of increased caution. ( a ) domestic developments in february 2007 i. e., prior to the annual policy statement, the cso had placed real gdp growth at 9. 2 per cent in 2006 - 07. by the time of the first quarter review, the cso had revised this estimate to 9. 4 per cent, indicative of the improvement in aggregate supply conditions, but also pointing to the firming up of demand pressures. in the first quarter of 2007 - 08, some supply conditions seem to have improved. the arrival of the rabi harvest, a satisfactory south - west monsoon so far and a slow catch - up in kharif sowing provides grounds for optimism regarding agricultural performance this year. activity in the industrial and services sectors has continued apace, though there seems to have been some moderation in specific sectors. in the disposition of aggregate demand, however, there appear to be signs of some shifts underway. although the demand for consumer nondurables has picked up, the coincident high growth in capital goods and non - oil imports, secondary effects on intermediate goods and stretched capacity utilisation together suggest that investment demand could be intensifying. there seems to be a general optimism about india ’ s growth prospects in projections made by various agencies ; some agencies have taken the lead in initiating upward revisions ( table 1 ). within this overall picture of the real economy, headwinds to growth seem to be reshaping the outlook. while

few hundred years for which we have some rough productivity approximations, human ingenuity, even at its best, appears to have rarely produced annual productivity growth approaching double - digit rates for any protracted period of time. any notable shortfall in economic performance from the standard set in recent years, as i indicated earlier, runs the risk of reviving sentiment against market - oriented systems even among some conventional establishment policymakers. at present, such a shortfall is not anticipated, and such views are not widespread. but they resonate in some of the arguments against the global trading system that emerged in washington, dc, and seattle over the past year. although most of these arguments may be easy to reject, those of us who support continued endeavors to extend market - driven globalization need to understand and, if possible, address the concerns that give rise to the desire to roll back globalization. how the convergence of economic systems toward the most market - oriented capitalist structures will fare if world long - term economic growth trends revert to historic norms is an intriguing question. in the meantime, this extraordinary period of technological advance continues to exhibit great vitality, bringing with it the prospect of further globalization, greater competition, and the resulting improvements in the economic welfare of most of the world ’ s citizens. it is almost surely the case that, the longer the process of globalization of economic activity continues, the more firmly entrenched will be the gains we are beginning to realize. but our past endeavors at long - term forecasting afford us little confidence in being able to anticipate seminal changes in global economics and finance. we cannot, however, refrain from reflection. that is what this conference is all about.