Indian Economy

Paper Summary:

The process of globalization has gathered momentum, mainly due to the rapid increase in cross-border capital flows stimulated by trade liberalization and rapid diffusion of IT. The IMF spearheaded the issue of freer capital mobility or capital account convertibility in order to spread the benefits of globalization to developing economies. However, a spate of currency crises resulting in sudden capital flow reversals plunged countries that had achieved miracle growth rates with open capital accounts into economic turmoil. This paper reviews the up-to-date performance of India on this front. It analyzes the pre-conditions suggested by Tarapore Committee on full capital account convertibility in India in view of the empirical evidence on each of them. On the basis of these findings, the paper arrives at the extent of preparedness India has achieved towards full capital account convertibility.
The paper includes many graphs and tables.

Paper Outline:
Introduction
Opportunities and Risks of Full CAC
Required Pre-conditions and Achievement on Them
Concluding Remarks
References

From the Paper:

"Generally, it is argued that full capital account convertibility is beneficial for the economy but several caveats had to be put after learning lessons from the Asian Currency Crisis of 1997. The general belief before the crisis had been that CAC and complete financial openness ensure efficient allocation of global resources, promote higher growth and discipline the domestic macroeconomic policies. The countries that had capital controls in place escaped the contagion of the crisis, which revealed that Capital controls can be effective".

More papers on Indian Economy:

• Research Paper # 38752 : "Modern Indian Economy"
• Essay # 34189 : "Indian Economy and Government"
• Essay # 39152 : "Indian Economic Development"

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