India's Approach to Capital Account Liberalization

Eswar Prasad ()

No 3927, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: 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.

Keywords: India; international financial integration; capital controls; capital flows (search for similar items in EconPapers)
JEL-codes: F3 F4 O2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cwa, nep-dev and nep-opm
Date: 2009-01

Forthcoming in: Brookings India Policy Forum

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Related works:
Working Paper: India’s Approach to Capital Account Liberalization (2009)
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