India's Financial Globalisation

25 Pages Posted: 1 Feb 2011

See all articles by Ajay Shah

Ajay Shah

Independent

Ila Patnaik

Indian Express; International Monetary Fund (IMF)

Date Written: January 2011

Abstract

India embarked on reintegration with the world economy in the early 1990s. At first, a certain limited opening took place emphasising equity flows by certain kinds of foreign investors. This opening has had myriad interesting implications in terms of both microeconomics and macroeconomics. A dynamic process of change in the economy and in economic policy then came about, with a co-evolution between the system of capital controls, macroeconomic policy, and the internationalisation of firms including the emergence of Indian multinationals. Through this process, de facto openness has risen sharply. De facto openness has implied a loss of monetary policy autonomy when exchange rate pegging was attempted. The exchange rate regime has evolved towards greater flexibility.

Keywords: Capital controls, Capital flows, Economic integration, Exchange rate regimes, External borrowing, Financial sector, Foreign direct investment, Globalization, India, Monetary policy

Suggested Citation

Shah, Ajay and Patnaik, Ila, India's Financial Globalisation (January 2011). IMF Working Paper No. 11/7, Available at SSRN: https://ssrn.com/abstract=1751417

Ila Patnaik

Indian Express ( email )

New Delhi
India

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

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