Capital flows: India to redefine road map

Capital flows: India to redefine road map

New Delhi/Mumbai: India will redefine the roadmap for capital controls from time-to-time to cushion the impact of foreign investments on inflation and growth, central bank governor D. Subbarao said in Mumbai on Friday.

Accelerating growth in emerging markets is attracting overseas funds and if they are volatile, it’s going to test the effectiveness of central bank policies, Subbarao said at a conference.

How emerging market economies manage the impossible trinity—the impossibility of having an open capital account, a fixed-exchange rate and an independent monetary policy—is going to have an impact on their prospects for growth, price stability and financial stability, the governor said.

The challenge for central banks is to better understand the interplay of global factors and domestic variables and factor that into their policy calculus, Subbarao said.