Liberalised Foreign Investment Flows and External Sector Sustainability in India

Abstract

Liberalisation of Indian Economy since 90s was extremely successful in attracting debt and non-debt creating Capital flows and keeping the Balance of Payments account as favorable. The success of the reform measures induces further the openness of the Indian economy vis-a-vis other emerging economies in the line of attracting the destination of capital flows. Indian economy is still a restrictive economy in terms of attracting 100% .fi·ee flow of capital while compared to its competitors. Further removal of trade restrictions and domestic policy restrictions on capital flows will enhance economic stability and sustainable Balance of Payments. This study investigates the effect of FDI and portfolio flows on exchange rate, exports and sustainable Balance of Payments position of India since 2000.