Wednesday, September 19, 2007

The capital flows puzzle

I wrote a piece in Business Standard today: The capital flows puzzle. Coincidentally, on the same day, there was a front page story by Surabhi in Financial Express which says that the RBI proposes that convertibility should not be done for the next 10 years. I'm not sure they understand that India's globalisation is not entirely in their control.

1 comment:

  1. Sir,

    First of all thanks for another nice article.
    Today in an article in Economic Times its given that the difference between local and overseas rates on a fully hedged basis is over 175 basis points. Now this certainly is too attractive for the Indian companies. But this means that the hedging costs are simply too low. I mean why is this huge arbitrage still available? If this arbitrage got reduced (which it should) the capital inflow problem will get resolved on its own. I mean this is how economics should work (I know it would work in ideal conditions, but still the arbitrage available is too huge to be explained).

    Nishant Jha


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