ABOUT THE BOOK
liberalization and special measures to attract foreign financial capital
flows have triggered massive capital inflows into the Indian economy
in the last five years, leading to the accumulation of large foreign
exchange reserves. These developments contribute to the common perception
The fund inflows are financing a bubble in the Indian stock and real estate markets, rendering them vulnerable to sharp reversals and speculative attacks which can have a ripple effect on other areas of the economy. In addition, the increasing influence of financial interests in a liberalized market forces the state to adopt a deflationary fiscal stance, with adverse consequences for output and employment growth. Besides fiscal policy, the conduct of monetary policy is also compromised by the need to manage the impact of the capital influx on the exchange rate. Finally, the institutional change associated with financial liberalization involves the dismantling of financial structures - such as directed credit to the agricultural sector and small-scale industry, and the provision of development finance - that have been crucial in stimulating broad-based economic growth.
The Indian experience with financial liberalization presented in this paper provides a compelling case for rethinking the merits of an open-door policy towards the freewheeling forces of global finance.
ABOUT THE AUTHOR
CHANDRASEKHAR is a Professor at the Centre for Economic Studies
1. FINANCIAL LIBERALIZATION AND CAPITAL INFLOWS
2. THE ROLE OF DEBT
3. SIGNS OF FRAGILITY
4. FINANCIAL FLOWS AND FISCAL CONTRACTION
5. IMPLICATIONS OF CURBING THE MONETIZED DEFICIT
6. FINANCIAL FLOWS AND EXCHANGE RATE MANAGEMENT
7. FOREIGN CAPITAL AND DOMESTIC INVESTMENT
8. FINANCIAL LIBERALIZATION AND FINANCIAL STRUCTURES
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