Channeling foreign capital inflows

ESWAR PRASAD, fellow at Brookings Institution and Professor of Trade Policy at Cornell University analyzes India’s record current account deficit and asserts that policymakers must look for more ways to channel capital inflows into productive investments, which would help the country attain the potential benefits of foreign capital with less exposure to the risks of volatile short-term flow. In an op-ed for the Wall Street journal, "How India Can Cope With Plenty", he recommends multiple measures that policymakers could implement such as: opening up FDI to various sectors, reforming corporate bond markets, tackling corruption and red-tape, reining in government expenditure, and switching from inefficient subsidies to direct cash transfers, arguing that the current period of high growth and large capital inflows could be the best ever opportunity for India to implement those reforms.