With the emergence of a "two-speed" world in the aftermath of the 2008 crisis, financial flows are expected to flood emerging markets' shores, including those of India which has positive growth and interestrate differentials vis-à-vis the advanced countries. This article discusses existing policy options for India and concludes by emphasising the need to evolve a medium-term response strategy, one of whose elements include countercyclical fiscal responses.
DEALING WITH THE CAPITAL SURGE
|
Managing Capital Flows, c.2010: |
as large as that in 2007, export growth is low and likely to remain depressed, the |
|
Policy Options for India |
fiscal deficit wider by over 2 percentage points and short-term debt inflows are ris |
|
|
ing fast. The external environment is dra |
|
|
matically different: Advanced countries |
|
Renu Kohli |
are on a low-growth path and interest |
With the emergence of a “two-speed” world in the aftermath of the 2008 crisis, financial flows are expected to flood emerging markets’ shores, including those of India which has positive growth and interestrate differentials vis-à-vis the advanced countries. This article discusses existing policy options for India and concludes by emphasising the need to evolve a medium-term response strategy, one of whose elements include countercyclical fiscal responses.
