Although influenced by particular contextual factors that may not be capable of being generalised, the Indian experience of capital account liberalisation tends to vindicate a process approach, with the emphasis on caution and gradualism. This article explains the policy framework that governed liberalisation in the 1990s, and describes the current framework of controls; various facets of the Indian approach to managing the capital account; and current thinking on appropriate further steps. To date, the accent has been on progressively replacing administrative controls with prudential limits on transactions, these norms being guided by the country's absorptive capacities and financing needs, and by the need to achieve a mix of short-term and long-term, debt and non-debt, and stable and volatile flows.
Document Type: Research Article
Deputy Governor, Reserve Bank of India