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.
In the process of finalisation of Basel III, the Committee has also stated its intention to improve the standardised approaches for credit and operational risk. Broadly speaking, the aim is also to make them more risk-sensitive. The standardised approaches are important per se, since they are used by a great number of banks worldwide; but as restrictions on the use of internal models are introduced they will become even more important. Thus, discontinuing the use of internal models to measure operational risk would mean that all institutions, irrespective of size, business model or type of business, would have to use the same standardised approach to measure operational risk. Measuring such a heterogeneous risk using a standardised approach clearly presents considerable difficulties. 6/7  The proposal published for public consultation by the Basel Committee has a series of limitations that must be remedied before it is approved. Regarding the use of the standardised approach to measure credit risk, the Committee is striving to make it more risk-sensitive and, at the same time, to reduce its excessively automatic reliance on external credit ratings. This is no easy task either, and the final outcome may possibly be less ambitious than was initially intended. It is important, however, that the approach be robust and correctly calibrated. The impact assessments being performed by the Basel Committee will provide more information in this respect. In accordance with the guidelines we all subscribe to, as I mentioned earlier, this package of reforms should not produce a significant widespread increase in capital requirements.