Loading...

Top
Help
×

By creating an account you can:

Logo TaxTMI
Call Us / Help / Feedback

Contact Us At :

E-mail: [email protected]

Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters 0/2000
Make Most of Text Search
  1. Checkout this video tutorial: How to search effectively on TaxTMI.
  2. Put words in double quotes for exact word search, eg: "income tax"
  3. Avoid noise words such as : 'and, of, the, a'
  4. Sort by Relevance to get the most relevant document.
  5. Press Enter to add multiple terms/multiple phrases, and then click on Search to Search.
  6. Text Search
  7. The system will try to fetch results that contains ALL your words.
  8. Once you add keywords, you'll see a new 'Search In' filter that makes your results even more precise.
  9. Text Search
Add to...
You have not created any category. Kindly create one to bookmark this item!
Create New Category
Hide
Title :
Description :
❮❮ Hide
Default View
Expand ❯❯
Close ✕
🔎 News - Adv. Search
TEXT SEARCH:

Press 'Enter' to add multiple search terms. Rules for Better Search

Search In:
Main Text + AI Text
  • Main Text
  • Main Text + AI Text
  • AI Text
Category: ?
Categorized by AI
---- All Categories ----
  • ---- All Categories ----
  • Income Tax
  • GST
  • Customs, DGFT & SEZ
  • FEMA & RBI
  • Corp. Laws, SEBI & IBC
  • PMLA, Black Money & ED
  • Budget
  • News and Press Release
  • PTI News
Month:
---- All Months ----
  • ---- All Months ----
  • January
  • February
  • March
  • April
  • May
  • June
  • July
  • August
  • September
  • October
  • November
  • December
Year:
---- All Years ----
  • ---- All Years ----
  • 2026
  • 2025
  • 2024
  • 2023
  • 2022
  • 2021
  • 2020
  • 2019
  • 2018
  • 2017
  • 2016
  • 2015
  • 2014
  • 2013
  • 2012
  • 2011
Sort By: ?
In Sort By 'Default', exact matches for text search are shown at the top, followed by the remaining results in their regular order.
Relevance Default Date
❯❯
Maximize Maximize Maximize
0 / 200
Expand Note
Add to Folder

No Folders have been created

+

Are you sure you want to delete "My most important" ?

NOTE:

News
Showing Results for :
Reset Filters
Results Found:
Show All Summaries Hide All Summaries
September 1, 2026
Show AI Summary
Personal guarantor insolvency: repayment plan stayed pending majority determination, with restraint on direct or indirect asset alienation.
Personal-guarantee insolvency proceedings involve a stay on implementation of a repayment plan because the earlier members' views did not produce a clear majority capable of taking effect. The personal guarantor has been restrained from directly or indirectly alienating assets pending further hearing. The dispute follows split views on approval of the plan, claim admission and voting, followed by a third-member opinion that did not resolve the absence of a determinative majority. Creditors dispute the proposed recovery, claim treatment and declared net worth relevant to the guarantees.
September 1, 2026
Show AI Summary
Rupee exchange-rate movement reflects portfolio inflows, growth data and possible central-bank support, while crude oil prices constrain gains.
Foreign-exchange market conditions strengthened the rupee by 28 paise to 94.94 against the US dollar, supported by domestic growth, controlled fiscal slippage and portfolio inflows. Possible Reserve Bank of India intervention was also identified as supportive. Higher crude oil prices, weak domestic equities and hawkish US monetary-policy signals were identified as constraints on further appreciation. Foreign investment flows, stronger-than-expected domestic growth and the fiscal-deficit position remained material factors affecting currency conditions.
September 1, 2026
Show AI Summary
Money-laundering probe into public service recruitment irregularities examines alleged question-paper leaks, selection manipulation, and laundering through purported CSR donations.
Money-laundering investigation under the Prevention of Money Laundering Act concerns alleged irregularities in Public Service Commission recruitment examinations. Allegations include question-paper leaks, manipulation of candidate selection, and illegal gratification for securing appointments of relatives and favoured candidates. Recruitment rules were allegedly amended to facilitate selection of relatives. Alleged proceeds of crime were collected in cash and routed through layered banking transactions, including through a family-controlled samiti presented as receiving corporate social responsibility donations for a non-existent college.
September 1, 2026
Show AI Summary
Personal guarantor settlement scrutiny intensifies as asset alienation is restrained pending review of a disputed creditor repayment proposal.
A five-member special bench found that no clear majority view existed under section 419(5) of the Companies Act and stayed the third member's order that had permitted the proposed recovery. Notices were directed to all parties, and the guarantor was restrained from directly or indirectly alienating property pending further consideration. The dispute concerns approval of a personal guarantor's repayment proposal, treatment of guarantee claims, creditor voting support, assessment of the personal estate, and scrutiny of declared net worth.
September 1, 2026
Show AI Summary
Personal insolvency proceedings restrict property alienation while notices issue to parties in the debtor's case.
A five-member special National Company Law Tribunal bench hearing Subhash Chandra's personal insolvency matter issued notices to all parties and restrained him from alienating property directly or indirectly. The restraint applies during the continuing insolvency proceedings and concerns dealings with the relevant property. The procedural measure requires the interested parties to participate in the matter.
September 1, 2026
Show AI Summary
Aadhaar authentication alternatives enable eligible farmers with failed fingerprint verification to access loan-waiver benefits after identity verification.
Elderly farmers whose fingerprints cannot be captured for Aadhaar authentication may approach an Aaple Sarkar Seva Kendra with their Aadhaar card and bank passbook. Loan-account details are verified on the scheme portal before authentication is initiated. If authentication fails, the concerned tehsildar verifies identity using the Aadhaar card, bank passbook and 7/12 land record extract. Eligible farmers receive loan-waiver benefits directly in their bank accounts after authentication, identity verification and satisfaction of the scheme's eligibility criteria.
September 1, 2026
Show AI Summary
GST collection growth reflected higher domestic and import revenue, while increased refunds moderated net collections during August.
GST collections recorded year-on-year growth in August, with gross receipts reaching about Rs 2 lakh crore. Domestic transaction revenue increased to over Rs 1.37 lakh crore, while import-related revenue rose to Rs 62,604 crore. Refunds increased to Rs 31,795 crore, and net GST collections stood at Rs 1.68 lakh crore after refunds.
September 1, 2026
Show AI Summary
Personal insolvency repayment plan faces fresh hearing after a split bench prevents enforcement and restrains guarantor property transfers.
Personal insolvency proceedings were reopened before a five-member special bench after a split view on a repayment plan. As no majority view existed, including that of the third member, no final order was in force and the repayment-plan determination could not be acted upon. Notices were issued to all parties, including dissenting creditors, and the guarantor was restrained from directly or indirectly alienating property pending further consideration. Dissenting creditors also challenged the repayment-plan determination before the appellate tribunal.
September 1, 2026
Show AI Summary
Equity market sentiment weakens as higher crude prices, geopolitical tensions and tighter monetary policy expectations curb risk appetite.
Equity-market sentiment weakened as higher crude oil prices, renewed US-Iran tensions, and expectations of prolonged tight US monetary policy reduced emerging-market risk appetite. The Sensex and Nifty declined, while domestic GDP growth above projections offered partial support. Weakness in several Asian markets, a lower US market close, and net foreign institutional equity sales reinforced cautious trading conditions.
September 1, 2026
Show AI Summary
Money laundering investigation triggers searches linked to alleged Public Service Commission irregularities, including premises of a former chief minister's assistant.
A money-laundering investigation under the Prevention of Money Laundering Act has led to searches at seven locations in Chhattisgarh in connection with alleged irregularities at the Chhattisgarh Public Service Commission. The search operation includes the premises of K. K. Chandrakar, personal assistant to former Chief Minister Bhupesh Baghel. The investigation remains at the search and inquiry stage.
September 1, 2026
Show AI Summary
Income-tax return filing: non-audit business and professional taxpayers use applicable forms by prescribed due dates.
August 31, 2026 was the due date for taxpayers having business or professional income who were not subject to audit. Such non-audit taxpayers may use ITR-3, ITR-4, ITR-5 or ITR-7, as applicable. ITR-3 applies to individuals and Hindu Undivided Families with proprietary business or professional income, while ITR-4 is intended for small and medium taxpayers. ITR-5 applies to firms, limited liability partnerships and cooperative societies, and ITR-7 applies to trusts and charitable institutions.
September 1, 2026
Show AI Summary
Gold smuggling enforcement targets transit abuse, concealed carriage, and border routes through coordinated seizures and arrests nationwide.
Intelligence-led enforcement against organised gold smuggling resulted in the seizure of over 42 kg of foreign-origin gold and around 10 kg of foreign-origin silver, collectively valued at more than Rs. 65 crore, and the arrest of 25 persons. Operations targeted networks using airport transit routes, airport personnel, land-border corridors, coastal routes, and domestic road transport. Gold was concealed in wax, compound, paste, raw-chain and bar forms, including through body concealment, internally secreted capsules, clothing, and specially created cavities.
September 1, 2026
Show AI Summary
Predictive consumption-expenditure framework will use household survey data to support poverty estimation, consumption analysis, and economic planning.
MoSPI and Thapar Institute of Engineering & Technology have entered into a memorandum of understanding for a research study to develop a predictive and analytical framework for monthly consumption expenditure in India. The study will use Household Consumption Expenditure Survey data to estimate Monthly Per Capita Consumption Expenditure at national and state levels, analyse household consumption patterns, and generate evidence relevant to poverty estimation and broader economic planning.
August 31, 2026
Show AI Summary
Personal insolvency repayment plans: conflicting views on binding dissenting creditors prompted reconsideration through an expanded adjudicatory bench.
National Company Law Tribunal constituted a five-member bench after conflicting views on a personal insolvency repayment plan left no majority position for a formal order. The central issue is whether creditor approval of the plan binds dissenting creditors and extinguishes their claims against the personal guarantor. One view preserved dissenting creditors' independent recovery rights, while another applied the creditor-approved plan uniformly to all creditors. Disagreement also concerns the Adjudicating Authority's power to examine the resolution professional's report of the creditors' meeting.
August 31, 2026
Show AI Summary
Personal insolvency repayment plans raise unresolved questions on dissenting creditors' rights and uniform extinguishment of claims.
Personal insolvency proceedings were referred for fresh adjudication because no majority emerged on the repayment plan. The Technical Member rejected the plan; the Judicial Member confined it to consenting creditors while preserving dissentents' recovery rights; and the Third Member approved it with uniform extinguishment of all creditors' claims. The dispute concerns whether creditor approval under section 115(1) binds dissenting creditors, the effect of section 79(2)(g), and the Adjudicating Authority's power to examine the Resolution Professional's creditors' meeting report.
August 31, 2026
Show AI Summary
Rupee exchange-rate support through suspected intervention and FCNR(B) inflows offset pressure from dollar strength and higher crude prices.
Rupee exchange-rate movement reflected a recovery from early losses to close stronger against the US dollar, amid market expectations of Reserve Bank of India support at lower trading levels. Pressure arose from higher US Treasury yields, possible US rate-hike expectations and a broad dollar rally. Suspected intervention, FCNR(B)-related foreign-currency flows and the special USD-INR forex swap facility supported sentiment, while rising crude prices, geopolitical supply risks and foreign institutional equity outflows remained adverse factors.
August 31, 2026
Show AI Summary
Income-tax return filing for non-audit business and professional taxpayers closes at midnight, requiring use of applicable forms.
Income-tax return filing for Assessment Year 2026-27 reaches its due date on 31 August 2026 for taxpayers having business or professional income who are not subject to audit. Such taxpayers may file the applicable ITR-3, ITR-4, ITR-5 or ITR-7. ITR-3 applies to individuals and Hindu Undivided Families with proprietary business or professional income, ITR-4 to small and medium taxpayers, and ITR-5 to firms, limited liability partnerships and cooperative societies.
August 31, 2026
Show AI Summary
Monthly fiscal accounts track receipt composition, expenditure allocation, tax devolution, interest payments, and major subsidy outgo through July.
Union Government monthly accounts through July 2026 record total receipts comprising net tax revenue, non-tax revenue and non-debt capital receipts, with tax devolution transferred to State Governments. Total expenditure is divided between revenue and capital expenditure. Revenue expenditure includes interest payments and major subsidies.
August 31, 2026
Show AI Summary
Personal guarantor insolvency distinguishes guarantee liability from borrower debt while creditor voting challenges question repayment-plan approval.
Personal insolvency proceedings concerning personal guarantees distinguish a guarantor's liability from the underlying borrowing entities' debts. Claims against the guarantor arise from guarantees furnished for loans obtained by Essel Group-associated entities, while the borrowers' repayment obligations remain enforceable and creditors may pursue corporate assets and securities. Dissenting lenders have challenged the resolution-plan voting process, alleging that family-linked associates or related parties should have been excluded from committee of creditors voting.
August 31, 2026
Show AI Summary
National accounts revisions align GDP and sectoral estimates with updated price, production and banking service indicators.
National Accounts Statistics-2026 incorporates updated Producer Price Index, Index of Industrial Production and Banking Services Price Index series with base year 2022-23 into annual and quarterly GDP estimates. The revised indicators expand coverage, update weights and improve price mapping for national-account activities. GDP and gross value added estimates from 2022-23 onwards are revised at current and constant prices, with sector-specific effects in mining and quarrying, manufacturing, trade services, general government and departmental enterprises. Supply and Use Tables for 2022-23 and 2023-24 are also updated.

News

Back

All News

Showing Results for :
Reset Filters
No Records Found

News

Showing Results for : Reset Filters

India’s Capital Account Management – An assessment (Speech delivered by Shri T Rabi Sankar, Deputy Governor, Reserve Bank of India – October 14, 2021- at the Fifth Foreign Exchange Dealers’ Association of India (FEDAI) Annual Day)

October 16, 2021

Contents
Acts
Summary
Note

Note

-

Bookmark

Print

Print

1. In the previous FEDAI Annual Day address in November 2020, Governor Shri Shaktikanta Das had observed that CAC will continue to be approached “as a process rather than an event”. What I will do in this address is to expand on that theme and bring into focus some of the important issues on which, in my opinion, further public debate is warranted, to continue along this process of capital account convertibility.

What is capital account convertibility?

2. The balance of payments (BOP) of a country records all economic transactions of a country (that is, of its individuals, businesses and governments) with the rest of the world during a defined period, usually one year. These transactions are broadly divided into two heads – current account and capital account. The current account covers exports and imports of goods and services, factor income and unilateral transfers. The capital account records the net change in foreign assets and liabilities held buy a country. Convertibility refers to the ability to convert domestic currency into foreign currencies and vice versa to make payments for balance of payments transactions. Current account convertibility is the ability or freedom to convert domestic currency for current account transactions while capital account convertibility is the ability or freedom to convert domestic currency for capital account transactions. The Tarapore Committee (2006), for instance, defined capital account convertibility as the “freedom to convert local financial assets into foreign financial assets and vice versa.”

3. The degree of BOP convertibility of a country usually depends on the level of its economic development and degree of maturity of its financial markets. Therefore, advanced economies (AEs) are almost fully convertible while emerging market economies (EMEs) are convertible to different degrees.

Why is capital account convertibility important?

4. Free capital mobility, or internationalization of capital markets, is commonly recognized as an engine of global growth. Specifically, benefits of internationalization of capital markets are well accepted, in terms of broadening the investor base for recipient country financial assets, improved liquidity in financial markets and positive pressures for market infrastructure and market practices. International capital markets, by enabling access to a global savings pool and to different currencies, can potentially reduce borrowing costs, facilitate better risk allocation and enhance global liquidity (OECD, 2017)2.

What are the risks of free capital mobility and how are these risks managed?

5. The various currency and banking crises experienced over the last few decades have simultaneously highlighted the costs and risks of internationalization such as exposure to global shocks, credit and asset bubbles, exchange rate volatility associated with sudden exit of capital and higher refinancing risk. Increased globalization has brought to the fore the vulnerability to contagion effects. While it was argued that such risks are the short-term pains needed to reap long term gains (Kaminsky and others, 2008)3, there is now a wider acceptance that benefits of internationalization are not an unmixed blessing and that there is a nuanced trade off between growth and crisis risk. Such awareness has led to policy focus on three fronts.

a. First, that benefits of internationalization presupposes sound macroeconomic fundamentals, a well developed financial system and a sound market infrastructure, including efficient markets for funding and risk transfer.

b. Second, that countries need to develop appropriate tools to deal with the risks of internationalization, in particular, tools to manage the volume and composition of capital inflows and macro prudential tools.

c. And third, that different types of capital flows carry different risks – some are riskier than others. The agreed hierarchy of capital flows is that foreign direct investment is the least risky, followed by equity investment, followed by debt capital. While FDI is seen to contribute to long-run growth, portfolio equity gives a shorter run boost. Debt flows, while necessary, are susceptible to be volatile. Understandably, the focus of capital flow regulations, and macro-prudential regulations, has been debt flows.

6. Capital flow measures are effective insofar as they lead to safer external liability structures, by reducing dependence on foreign borrowing and could be particularly effective during sudden-stop episodes. They work essentially by avoiding risky flows or containing short-term debt or controlling currency exposure of domestic borrowers. Especially for economies where capital flows are relatively large, or the exposure of banking systems is significant, these measures could be more effective than macro prudential tools.

7. Macro prudential measures target systemic stability issues and tend to be capital based or liquidity based or borrower based. Capital based measures like counter cyclical capital buffers or higher-than-standard capital requirements or calibration of capital risk weights intended to change incentives for certain types of funding are commonly used. Liquidity Coverage Ratio or Net Stable Funding Ratio can be used to manage exposure to short term flows. Similarly, credit or asset bubbles can be controlled using Loan-to-Value ratio or Debt Service-to-Income ratios.

8. There is extensive global discussion on the choice and effectiveness of these tools to deal with specific vulnerabilities. There is reasonable consensus that none of these measures is undesirable in itself. There is also broad agreement on the sequencing of these measures. That the first line of defence against risks of capital flows are prudent macroeconomic policies and a strong institutional base. External borrowing should be controlled until corporate governance and supervisory standards are robust.

9. Not all emerging economies, however, may have this choice, and may be constrained to depend on capital flows, either to meet their investment needs or to develop financial markets. For many of these countries, the required development of policy and markets has to happen simultaneously with dependence on foreign capital. Often, there is only a limited choice on the type of capital that flows in, leading to dependence on risky debt capital. Managing these flows with a not-so-efficient domestic institutional base requires policy flexibility. Usually, managing the spillover risks of global capital involves a combination of these and macro prudential measures. Building up reserves has been an acceptable course, especially after the Asian crisis. Having some control on the amount of debt capital as well as on its nature is another defence. Long-term debt flows could be preferred to short-term flows, stable investors (pension or insurance funds, reserve portfolios) could be preferred to flighty investors such as carry traders, arbitrage traders etc. In a sense capital flow measures may really be used to compensate for lack of strong macro-fundamentals and adjustment mechanisms (Fratzscher, 2012)4.

10. Thus, capital flows are useful, and in case of many EMEs, even necessary. The choice is in how to manage the attendant risks. Effective management of these risks, especially those associated with debt flows, requires a diversified policy tool-kit. Which of these is used is basically a function of the degree of development of the economy and markets of the country.

Capital flow management in India

11. External sector liberalisation started in India with the economic liberalisation process that commenced in the early nineties – moving to a a floating exchange rate regime and freeing up current account transactions. The enactment of the Foreign Exchange Management Act, 1999 codified this arrangement with relatively free current account transactions (except for a negative list) and controlled capital account transactions. Liberalisation in this context basically meant gradually freeing up capital account transactions. Over the last two decades, FDI has become more or less unrestricted except (i) for some sectoral caps and (ii) restrictions in a few socially sensitive (e.g., gambling) or volatile (e.g., real estate) or strategic (e.g., atomic energy) sectors.

12. The policy regime for foreign portfolio investments in India commenced in 1992 when Foreign Institutional Investors (FIIs, or, since January 2014, FPIs) were allowed to invest in domestic financial instruments, basically equity. FPIs were given access to corporate debt markets in 1995 and to G-secs in 1997. Thus, the FPI regime has followed the standard process of liberalising equity flows first and then gradually freeing up debt capital. Apart from sectoral caps to regulate control, portfolio flows into equities in India are virtually unrestricted. Access to debt markets - sovereign and corporate - is subject to macro caps and other macroprudential limits. These are designed to safeguard the domestic economy from excessively speculative hot money flows.

13. There is an effort to liberalize FPI debt flows further with the introduction of the Fully Accessible Route (FAR) which places no limit on non-resident investment in specified benchmark securities. Since over time, virtually all securities will fall under the FAR category, the move is unambiguously towards an eventual unfettered access for non-residents into Government securities. Efforts to get India included under global bond indexes and the complementary move towards placing G-secs under global custodians, once implemented, will encourage debt flows in future.

14. The first comprehensive guidelines on External Commercial Borrowing (ECB) were issued by Government, in July 1999. It has been liberalised over time. Currently, ECB by corporates, while more open than portfolio flows, seeks to enable medium to long term debt (minimum tenor) only healthy corporates to borrow (through cost ceilings) subject to an overall soft limit. A few “end uses” – real estate, capital market, equity - are not permitted.

15. Chart 1 (see Annex for all charts) shows that the actual flows of capital have been broadly in the desirable direction with direct investments (FDI flows) outstripping portfolio investments (FPI flows) and equity flows (FDI plus FPI equity5) outstripping debt flows (FPI Debt plus ECB). The gradual liberalization of capital inflows has been consistent with the realization of the preferred composition of capital inflows.

16. The focus on capital outflows has understandably been far less given that India’s priority is to attract foreign capital to fund its savings gap. There is basically one channel – Overseas Direct Investment (ODI). The Liberalized Remittance Scheme (LRS) for individuals, while it is open for both current and capital account transactions, is largely (more than 90%) in current account transactions like travel, studies etc.

Issues for wider debate

17. While the progress so far can be considered to have moved broadly along the desirable direction, there are some issues which require a wider debate as there are no standard answers. We will discuss some of these issues below.

a. With the Fully Accessible Route, as discussed above, over time the entire G-sec issuance would be eligible for non-resident investment. While experience of other countries suggest that non-residents are unlikely to hold a major portion of outstanding stock, substantial debt holdings might make India vulnerable to the risk of sudden reversals. Since this channel was permitted in the context of inclusion of India’s G-secs in global bond indices, there is a natural safety mechanism as index investors are unlikely to indulge in sudden reversals. It may need to be considered, from a macroprudential perspective, whether FAR should be linked to index inclusion.

b. As the LRS Scheme has operated for some time, there may be a need to review it keeping in mind the changing requirements such as higher education for the youth, requirement of start-ups etc. There might even be a case for reviewing whether the limit can remain uniform or can be linked to some economic variable for individuals.

c. A key aspect of currency convertibility is integration of financial markets. Over time, it is essential that two markets – onshore and offshore - for domestic currency or interest rates cannot exist with efficiency. With increased convertibility, these markets need to be linked. An effort has already commenced in the interest rate derivative segment. Allowing Indian banks access to NDF markets for the Rupee is also consistent with this objective. As G-secs get held by global custodians and traded abroad more and more non-residents get to hold Rupee assets and take Rupee exposure. These measures are already seeing the desired results - for instance, NDF-onshore spreads have substantially narrowed after allowing Indian banks into the NDF space (Chart 2, see Annex). We need to now consider whether India is ready to allow such non-residents to hold Rupee accounts. This will be an important early step in internationalization of the Rupee and, therefore, needs to be carefully considered. Further, there is a need to consider a proper mechanism for information flow so that exchange and interest rate management can continue to be effective in an environment of larger offshore transactions.

d. As onshore and offshore financial markets get integrated, it should be ensured that price discovery in the domestic markets is efficient lest flows move to the offshore segment. Take the case of the Rupee exchange rate. It is market determined with fairly tight bid-ask spreads in the interbank market. Major corporates also seem to benefit from tight pricing. Yet many entities, especially SMEs, small exporters, individuals, etc., are prone to over-pricing. Do processing charges and market risk for warehousing odd lot positions justify these spreads? An effective way is to shift price discovery for the retail forex users to a platform. While such a platform (FX Retail) has been developed, it appears that banks do not find it in their interest to navigate customers to use that platform. In this age of technology, it may not really be possible to shun superior technology for any length of time. There should be a debate on the use of the platform and banks should make an effort to give it a fair trial.

Conclusion

18. India has come a long way in achieving increasing levels of convertibility on the capital account. It has broadly achieved the desired outcome for the policy choices it has made, in terms of achieving a stable composition of foreign capital inflow. At the same time, India is on the cusp of some fundamental shifts in this space with increased market integration in the offing and freer non-resident access to debt on the table. The rate of change in capital convertibility will only increase with each of these and similar measures. With that comes the responsibility to ensure that such flows are managed effectively with the right combination of capital flow measures, macro-prudential measures and market intervention. All of us need to consider deeply the issues I have highlighted above and arrive at effective solutions. Market participants, particularly banks, will have to prepare themselves to manage the business process changes and the global risks associated with capital convertibility. The regulator’s job is somewhat different. As someone once said, the job of a regulator is like the gas regulator in the kitchen - it cannot ensure the quality of the dish, but it can prevent the kitchen from blowing up. The quality of the dish – that is, the efficiency with which investment needs of the country are met - is up to how well Authorized Dealers and other intermediaries adjust to the increasingly fuller capital account convertibility.

Annex - Charts

Chart 1

Chart 2

----

1 Speech delivered by Deputy Governor Shri T Rabi Sankar on the Fifth Foreign Exchange Dealers’ Association of India (FEDAI) Annual Day on October 14th, 2021. It was delivered via virtual platform.

2 OECD (2017), Open and Orderly Capital Movements: Interventions from the 2016 OECD High-Level Seminar.

3 Kaminsky Graciela Laura and Sergio L. Schmukler: Short-Run Pain, Long-Run Gain: Financial Liberalization and Stock Market Cycles, review of Finance, 2008

4 Fratzscher, Marcel: Capital Controls and Foreign Exchange Policy, Working Paper Series, European Central bank, February 2012.

5 FPI flows into equity over the 15-year period (2006-07 to 2020-21) accounts for 73% of total FPI inflows, while flows into debt account for the remaining 27%.

Topics

Acts Income Tax