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India’s Approach to Capital Account Liberalization

  • Eswar S. Prasad

    ()

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]

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Date of creation: Jun 2009
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Handle: RePEc:ess:wpaper:id:2043
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  19. Kristin J. Forbes, 2005. "The Microeconomic Evidence on Capital Controls: No Free Lunch," NBER Working Papers 11372, National Bureau of Economic Research, Inc.
  20. Mukerji, Purba, 2009. "Ready for capital account convertibility?," Journal of International Money and Finance, Elsevier, vol. 28(6), pages 1006-1021, October.
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  22. Kose, M. Ayhan & Prasad, Eswar & Terrones, Marco E., 2008. "Does Openness to International Financial Flows Contribute to Productivity Growth?," IZA Discussion Papers 3634, Institute for the Study of Labor (IZA).
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