While India has made substantial progress towards de facto convertibility, the de jure situation has not commensurately changed. Capital account decontrol is riddled with quantitative restrictions and piecemeal measures. Fundamental foundations of the old approach have not been questioned; tinkering at the margins has been done in trying to open up.
One casualty of this piecemeal approach is legal clarity and the deeper concept of rule of law. Writing in Business Standard today, Somasekhar Sundaresan writes about the legal mess in FDI policy. This should be read alongside his piece on portfolio investment on 26 May. A short while ago, I had touched on the problem of rule of law in RBI's administration of ECB policy.