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Capital Account Liberalisation
This paper documents trends in capital flows into India in a comparative perspective, examines the impact of these flows on key macroeconomic variables and discusses the implications for economic policy.
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Introduction
The last decade has witnessed a tremendous increase in the mobility of international capital. Crosscountry trends in capital flows reveal that private capital flows now dominate with official capital flows reduced to a trickle. Simultaneously, a rise in portfolio capital has tilted the composition of international capital flows towards shortterm investments, exposing individual countries to enhanced volatility and sudden withdrawal risks. These have been driven both by strong trends towards globalisation, which has enabled pursuit of higher returns and portfolio diversification, and the marketoriented reforms in many countries, which have liberalised access to financial markets
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