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External Debt and Capital Flight in the Indian Economy

Listed author(s):
  • Niranjan Chipalkatti
  • Meenakshi Rishi
Registered author(s):

    This paper estimates Indian capital flight at US $88 billion (in 1997 dollars) over the 1971-97 period, a sum that is roughly 20% of the US $448 billion real external debt disbursed to the country over the same time period. There is also evidence of a strong year-to-year correlation between debt inflows and flight-capital outflows. The paper explores the nature of this association between capital flight and external debt in the Indian economy. An analysis by Boyce (1992, World Development, 20, pp. 335-349) for the Philippines revealed the presence of contemporaneous bi-directional causality, in other words, a financial revolving door relationship between external debt and capital flight in that economy. The research question addressed by this paper is whether such a financial revolving door relationship exists in India, given its higher level of external indebtedness and lower debt-to-GNP ratio as compared with the Philippines. Utilizing a simultaneous equation model to examine the association between capital flight and external debt in the Indian economy, the paper confirms the existence of a financial revolving door relationship between the two endogenous variables.

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    Article provided by Taylor & Francis Journals in its journal Oxford Development Studies.

    Volume (Year): 29 (2001)
    Issue (Month): 1 ()
    Pages: 31-44

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    Handle: RePEc:taf:oxdevs:v:29:y:2001:i:1:p:31-44
    DOI: 10.1080/13600810124596
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