in household debt 2002 – 7 was about the same as the increase in aggregate household financial assets. but of course this would not be true of individual households : distribution matters. when the price of property fell back, the debt remained. the two factors which have transformed what might seem a rather benign valuation blip into a crippling debt crisis are, of course ( i ) the distribution issue, namely the fact that different households were affected in dramatically different ways, depending mainly on whether they had borrowed to buy over - priced property and ( ii ) the fact that the government ’ s net debt position has also deteriorated by about €150 bn since 2007 : a third of it attributable to the bail - out of bank creditors6 and the rest resulting from the borrowing undertaken, especially from official sources, in the course of smoothing the transition to restoring budgetary balance. 7 the role of valuation changes is shown in cussen and phelan ( 2010, 2011 ). aggregate equity withdrawal from mortgage lending in the boom years amounted to about €8 billion ( lydon and o ’ leary, 2013 ). though not of bank shareholders, who lost essentially all of their investment ; subordinated debt holders of the banks also lost heavily. between them, these investors, mostly foreign, absorbed about half of the banking losses. the latter need became evident after the automatic fiscal stabilisers ( e. g. unemployment payments and reductions in tax revenue ) kicked - in when the global and domestic economic crises coincided to erode employment and income levels. bis central bankers ’ speeches if everyone ’ s assets and liabilities had been affected in the same way, then the return of net assets to their 2002 level might have seemed relatively painless. but the modest net change in aggregate household net worth between 2002 and 2012 should not mask an increase in aggregate indebtedness of over €100 bn. not everyone borrowed. but for most of those who did at the height of the price bubble, the devastating effect on their net worth of the subsequent price fall is the most significant wealth outcome of the crisis. it has sent net worth into negative territory for many, especially before taking account of future earning potential ( sometimes known as “ human capital ” in wealth analyses ). current and future earnings have also been damaged by unemployment. 8 migration flows are also a factor. the whole size distribution of net wealth moved to the left : pushing those at the bottom into very negative positions. while i cannot prove it, i

may recall that tax revenues have already risen by rs. 100 billion or 33 percent in last three years. the projected increase of 21 percent in the next two years is therefore very much in line with the past performance. fourth, as all of you know the large investment in balancing, modernization and replacement in textile industry during last few years will start paying dividends in form of better quality and higher value added exports. the share of value added items in total textile exports has already exceeded 60 percent and it is postulated that this share will be almost 70 percent by 2004 - 05. fifth, monetary and credit policies and banking sector reforms implemented so far will show some results in form of expansion in credit to housing, consumer financing, sme, agriculture sectors. as these sectors have strong backward and forward linkages the multiplier effects of aggregate demand expansion will reinforce growth impulses in the economy and induce supply and production response. sixth, the devolution of powers to local governments to deliver essential services at the grass root level will improve the effectiveness of development spending. as most projects will be driven by the demands of the community rather than imposed unilaterally by central planners, it is expected that waste and leakages will be kept at a minimum level. seventh, one of the major drivers of cost in the economy is electricity tariffs. both the households as well as industrial units are facing unviable power tariffs. with the commissioning of ghazi - brotha project, the thermal - hydel mix will change. as more thermal power is switched to natural gas from furnace oil, losses in transmission and distribution are curtailed and financial charges of ipps are cut down by prepayment of expensive debt power tariffs should come down and benefit the consumers. finally, the standards of governance set by the government in last three years should be sustained and further steps are taken to minimize corruption and leakages in financial transactions. merit remains the basis for recruitment and promotion in public service and nepotism and favoritism are no longer the norms. as you can see from the above that in this scenario we haven ’ t still relied on private sector investment as the engine of growth. public sector investment will go up fro 4. 7 percent of gdp to 6. 2 percent in 2004 - 05 while private sector investment will remain at 9. 4 percent – not much different from the current level of 9. 2 percent. let me conclude by saying that if the existing policies continue, standards of good governance are