Financial Daily from THE HINDU group of publications
Wednesday, Mar 29, 2006
Financial Daily from THE HINDU group of publications Wednesday, Mar 29, 2006 |
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Money & Banking
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Forex Government - Financial Policy `Drop full capital account convertibility plan' Our Bureau
New Delhi , March 28 A number of economists have urged the Government to desist from introduction of full capital account convertibility. Any such move would be "unnecessary and dangerous" and expose the Indian economy to extreme volatility, said economists numbering 150 in a statement today. They said that full capital account convertibility would imply that the inflow and outflow of capital by residents and non-residents would no longer be subject to any regulation. "This would expose the Indian economy to extreme volatility, since in the event of a capital outflow, it would no longer be only non-resident investors who would be able to repatriate their funds but Indian residents too who would be free to take out any amount of domestic wealth," the statement said. Citing the South American experience, the economists said that such outflows by local residents had contributed to the massive build-up of debt in the 70s and 80s. They added that the Indian economy could insulate itself from the South-East Asian financial crisis in the 90s only because the capital controls in place prevented destabilising movements of capital.
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