Capital flows and their macroeconomic effects in India

The gradual opening of India’s capital account in the 1990s has changed the external sector dynamics in India. Growing integration with the world economy has introduced new macroeconomic influences, making the task of macroeconomic management that much more challenging. This paper by Renu Kohli attempts to analyse the patterns and trends in capital flows into India in the 1990s and how these have affected the key macroeconomic variables in the economy. It also attempts to study the response of the policy makers to the new challenges posed by the partial capital account liberalisation.