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Some New Perspectives on India's Approach to Capital Account Liberalization

  • Eswar S. Prasad

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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14658.

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Date of creation: Jan 2009
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Publication status: published as Eswar S. Prasad, 2008. "Some New Perspectives on India's Approach to Capital Account Liberalization," India Policy Forum, Global Economy and Development Program, The Brookings Institution, vol. 5(1), pages 125-178.
Handle: RePEc:nbr:nberwo:14658
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