Baba, N., and F. Packer, 2009, “Interpreting Deviations from Covered Interest Parity During the Financial Market Turmoil of 2007–08,” Journal of Banking and Finance 33 (11), 1953–1962.
Gupta, A.S. and R. Sengupta, 2013, “Management of Capital flows in India”, Asian Development Bank South Asia Working Paper Series No. 17, March 2013.
Ma, G. and R.N. McCauley, 2013, “Is China or India More Financially Open?” Journal of International Money and Finance 39, 6–27.
International Monetary Fund, 2012, “Liberalizing Capital Flows and Managing Outflows,” International Monetary Fund, Washington D.C. http://www.imf.org/external/pp/longres.aspx?id=4645
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Prepared by Ran Bi.
See Gupta and Sengupta (2013) for a more in-depth discussion of India’s gradual approach of capital account liberalization.
See the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER). The limit on resident individuals, effective June 1, 2015, is US$250,000, significantly higher than India’s per capita GDP, which is about US$1,600.
A hypothetical case can clarify this point: consider a country with no legislated capital controls but it is also not financially integrated to the global economy (e.g., due to the lack of domestic financial market and hence no interest from external investors)—in this case, the de facto measures would mistakenly suggest full capital controls.
In principle, one could also calculate the onshore-offshore price gaps of bond yields as well as equity prices but data limitations further narrow our country sample, making a comparison of India with its peers more difficult.