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Managing Capital Flows, c.2010: Policy Options for India
With the emergence of a "two-speed" world in the aftermath of the 2008 crisis, financial flows are expected to flood emerging markets' shores, including those of India which has positive growth and interestrate differentials vis-à-vis the advanced countries. This article discusses existing policy options for India and concludes by emphasising the need to evolve a medium-term response strategy, one of whose elements include countercyclical fiscal responses.
DEALING WITH THE CAPITAL SURGE
| Managing Capital Flows, c.2010: | as large as that in 2007, export growth is low and likely to remain depressed, the |
| Policy Options for India | fiscal deficit wider by over 2 percentage points and short-term debt inflows are ris |
| ing fast. The external environment is dra | |
| matically different: Advanced countries | |
| Renu Kohli | are on a low-growth path and interest |
With the emergence of a “two-speed” world in the aftermath of the 2008 crisis, financial flows are expected to flood emerging markets’ shores, including those of India which has positive growth and interestrate differentials vis-à-vis the advanced countries. This article discusses existing policy options for India and concludes by emphasising the need to evolve a medium-term response strategy, one of whose elements include countercyclical fiscal responses.
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