The interactions between financial integration and financial efficiency and their relationship with financial stability are complex, and this is an area that we are only just beginning to understand. Increased integration is likely to improve the capacity of the system to diversify risk over a larger number of economic agents.
The Government’s recent policy focus to enhance India’s participation in global value chains, including through production linked incentives for targeted sectors, can leverage on the strong external balance position of India. Financial Market Developments 6. Let me now turn to financial markets.