ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Why Capital Account Convertibility in India Is Premature

At this stage, full capital account liberalisation promises no large benefits while it increases the risk of things going badly wrong. Variations in the flow of short-term capital, like bank loans, give rise to pro-cyclicality of the capital account, which provides the main mechanism by which free capital flows create problems. For the next 10 years at least, many other liberalising reforms need to take priority over capital account liberalisation.

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