Management of International Capital Flows: The Indian Experience

Abhijit Sen Gupta

No 1003, Competence Centre on Money, Trade, Finance and Development from Hochschule fuer Technik und Wirtschaft, Berlin

Abstract: In this paper we devise quantitative techniques to analyze the management of foreign capital flows in India over the past three decades. The paper argues that India’s overall approach towards liberalization of the capital account can be characterized as gradualist and calibrated, whereby certain agents and flows have been accorded priority in the liberalization process, from the viewpoint of ensuring financial stability. A cross country analysis indicates that the calibrated approach has resulted in India being ranked towards the lower end of the spectrum in terms of capital account openness. We analyze the extant regulations governing different types of foreign capital flow, and highlight the evolution of various types of capital flows over the recent period. To evaluate Indian macroeconomic management in the face of capital flows, we quantify the various policy options under the classic problem of “impossible trinity†. We find that India, like other emerging markets, has also been confronted with the various alternatives under †impossible trinity†and has chosen to adopt an intermediate regime, juggling the objectives of monetary independence, exchange rate stability, and an open capital account as per the needs of the economy.

Keywords: working paper; daadpartnership; finance-and-trade (search for similar items in EconPapers)
JEL-codes: E52 F36 F41 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2010-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Berlin Working Papers on Money, Finance, Trade and Development, August 2010

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Related works:
Working Paper: Management of International Capital Flows: The Indian Experience (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:mtf:wpaper:1003

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