Here again, there is a nexus in the appropriate rhythm and interaction between the liberalisation of financial versus real markets. Once financial liberalisation has started, the process benefits from continuous innovation and from its own impetus. The same does not apply to reforms in the labour and good markets where rigidities and obstacles are often deeply rooted. BIS Review 64/2007  3  Lastly, better integration into the global economy requires an appropriate exchange rate strategy. An emerging economy with high productivity gains and potential growth in the tradable sector is prone to receive large capital inflows and have a real appreciation of its currency in the long term. The latter may come either or both from nominal appreciation or higher relative inflation. Arguably, exchange rate appreciation, which may result in an overvalued currency, is a risk for emerging economies that conduct export-led growth strategies. In order to stem appreciation and maintain their competitiveness, some emerging economies – like China – have accumulated ever larger amounts of foreign reserves. However, undervalued currencies also represent a significant risk, not only for inflation but also because it allows foreigners to buy cheaply national assets. In addition, undervalued currencies contribute to ballooning global imbalances. "En passant", I am pleased to note that both India and the Euro area post significant but not extravagant levels of reserves and that neither is responsible for the persistence of global imbalances.
In particular, I would like to mention: •  The historical links with the public sector, such as in India where public banks still dominate the banking sector and  •  Banking sector expertise both in a rural environment, especially relevant for India, and in large industrial groups, as indeed Indian industrial groups are active internationally. In this respect, I am very pleased to participate with the RBI in the launching of the first French-Indian Financial Forum on May 16, in Mumbai. Thank you for your attention. 4  BIS Review 64/2007