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Should India Opt for Full Capital Account Convertibility?

Author

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  • Debashis Chakraborty
  • Arup Guha

Abstract

The usefulness of easing controls on capital flows in a country is a long-debated question. It is argued that the liberal capital control regime boosts the confidence of the international community on the domestic economy and becomes instrumental fo r ensuring higher capital inflows. On the contrary, it is widely held that controls on capital flow s ensure a developing country against experiencing a sudden potential currency crisis. In the light of the current debate in India on the appropriateness of adoption of Capital Account Convertibility (CAC), the current paper looks into the interrelation between current and capital account balance in the country first, and the macroeconomic scenario next, in order to explore whether the country has reached a stage to opt for fullfledged CAC. The empirical findings suggest that India should move cautiously in this regard.

Suggested Citation

  • Debashis Chakraborty & Arup Guha, 2007. "Should India Opt for Full Capital Account Convertibility?," Foreign Trade Review, , vol. 42(1), pages 3-27, April.
    • Handle: RePEc:sae:fortra:v:42:y:2007:i:1:p:3-27
    DOI: 10.1177/0015732515070101
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    Cited by:

    1. Chakraborty, Debashis & Mukherjee, Jaydeep & Sinha, Tanaya, 2010. "The Structural Relationship between Current and Capital Account Balance in India: A Time Series Analysis," MPRA Paper 22806, University Library of Munich, Germany.
    2. Tanveer Ahmad Khan, 2022. "Current and Capital Account Dynamics in India: An Empirical Analysis of the Post-Reform Period," Foreign Trade Review, , vol. 57(1), pages 41-65, February.
    3. Debashis Chakraborty & Jaydeep Mukherjee & Tanaya Sinha, 2012. "Is there any Long-run Relationship between India’s Current and Capital Account Balance? A Time Series Analysis," Global Business Review, International Management Institute, vol. 13(3), pages 433-447, October.
    4. S. K.S. YADAV, & Muhammad Ali Nawazeesh, Author- Workplace-Name: American International University, Bangladesh & Alexandru Mircea NEDELEA Author- Workplace-Name: Stefan cel Mare University of Suceava,, 2016. "Formal Trade Between India And Bangladesh: An Empirical Analysis," EcoForum, "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration - Economy, Business Administration and Tourism Department., vol. 5(2), pages 1-3, July.

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