Svein Gjedrem: Norwegian experiences in balancing economic development with macroeconomic stability - a historical perspective Speech by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), at the Norwegian Embassy, New Dehli, 21 March 2006. The  Charts in pdf-format can be found on the Norges Bank’s website. The speech does not contain assessments of the economic situation or the monetary stance. Please note that the text below may differ slightly from the actual presentation. *  *  *  Excellencies, Ladies and Gentlemen, It is a great honour to address you today on behalf of Norges Bank. The ties between Norway and India seem to be growing stronger, in spite of the geographical distance and vast differences between our two countries. Over the last few years, a number of Norwegian companies have entered the Indian market or strengthened their involvement in India. For example, the Norwegian oil and gas company Norsk Hydro reports that almost 300 000 hours of engineering services for the natural gas field Ormen Lange were supplied by Indian engineers, located in India. Last year, the Government Pension Fund made its first investments in the Indian stock market. By the end of 2005, the Fund had holdings in more than 70 Indian companies. There are also numerous cultural ties. This year, Norway is commemorating our most famous playwright Henrik Ibsen. A wide range of events is being arranged both in Norway and abroad.
Of particular interest is that Indian actors are providing fresh interpretations of Ibsen’s work, both in India and in Norway. The topic of my speech today is Norwegian experiences in balancing economic development with macroeconomic stability from a historical perspective. As a background for the subject, let me start with a brief characteristic of Norway today from an economic perspective. First, Norway is a small, mountainous country with a population of only 4½ million people scattered across a land area that is one tenth of the size of India. Second, Norway’s economic growth has been favourable for many years, and the per capita income is among the highest in the world. An abundance of natural resources, not least oil and gas, and openness to trade and capital movements are important reasons for this. The petroleum sector’s share of GDP was approximately 24 per cent in 2005. Over the last 10 years, the government has earned higher petroleum revenues than it has spent. Today we have a sizeable Government Pension Fund, which invests all its funds globally. Globalisation and cyclical developments have been kind to the Norwegian economy. Prices for our imported goods are falling in relation to prices for goods we export. Norway’s terms of trade are improving. The impact of the rise in oil and gas prices is particularly strong, but the terms-of-trade gains for the mainland economy have also been high. One aspect of this is that trade in services with India is increasing.