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India's Approach to Capital Account Liberalization

  • Prasad, Eswar

    ()

    (Cornell University)

In this paper, I analyze 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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3927.

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Length: 54 pages
Date of creation: Jan 2009
Date of revision:
Publication status: published in: Brookings India Policy Forum, August 2009
Handle: RePEc:iza:izadps:dp3927
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