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India’s Approach to Capital Account Liberalization

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  • Eswar S. Prasad

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Abstract

In this paper, the author analyzes India’s approach to capital account liberalization through the lens of the new literature on financial globalization. India’s authorities have taken a cautious and calibrated path to capital account opening, which has served the economy well in terms of reducing its vulnerability to crises. By now, the capital account has become quite open and reversing this is not a viable option. Moreover, the remaining capital controls are rapidly becoming ineffective, making the debate about capital controls rather moot. Managing de facto financial integration into international capital markets and aligning domestic macroeconomic policies in a manner that maximizes the indirect benefits and reduces the risks is the key challenge now facing India’s policymakers on this front.[IZA DP No. 3927]

Suggested Citation

  • Eswar S. Prasad, 2009. "India’s Approach to Capital Account Liberalization," Working Papers id:2043, eSocialSciences.
  • Handle: RePEc:ess:wpaper:id:2043
    Note: Institutional Papers
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    References listed on IDEAS

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    Cited by:

    1. Patnaik, Ila & Shah, Ajay, 2010. "Why India Choked when Lehman Broke," India Policy Forum, National Council of Applied Economic Research, vol. 6(1), pages 39-72.

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    Keywords

    India; international financial integration; capital flows; capital controls;

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