TY  - JOUR
AU  - Shah, Ajay
AU  - Patnaik, Ila
TI  - India's Experience with Capital Flows: The Elusive Quest for a Sustainable Current Account Deficit
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11387
PY  - 2005
Y2  - May 2005
DO  - 10.3386/w11387
UR  - http://www.nber.org/papers/w11387
L1  - http://www.nber.org/papers/w11387.pdf
N1  - Author contact info:
Ajay Shah
Ministry of Finance, New Dehli
E-Mail: ajayshah@mayin.org

Ila Patnaik
India
E-Mail: ilapatnaik@expressindia.com
M1  - published as Ajay Shah, Ila Patnaik. "India's Experience with Capital Flows: The Elusive Quest for a Sustainable Current Account Deficit," in Sebastian Edwards, editor, "Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences" University of Chicago Press (2007)

AB  - From the early 1990s onwards, India has engaged in policies involving trade liberalisation, strong controls on debt flows, and encouragement for portfolio flows and FDI, under a pegged exchange rate regime. Domestic institutional factors have led to relatively little FDI and substantial portfolio flows. There has been significant tension between capital flows and the currency regime. Many tactical details of the intricate reforms to the capital controls derive from the interlocking relationships between monetary policy, the currency regime and capital flows. In the recent period, pegging has given a capital outflow through reserves accumulation which was larger than the substantial net private capital inflows. In March 2004, difficulties of pegging appear to have led to a near-tripling of the nominal rupee-dollar returns volatility, which has reduced outward capital flows. The goal of the early 1990s - of finding a consistent way to augment investment using current account deficits - has remained elusive.
ER  -