The intellectual shift on capital controls amidst fuller capital account convertibility

Capital Account convertibility (CAC) has always been a topic of great debate both for the government and economic thinkers across the globe. It can be seen as an extension of the process of financial liberalization as well as a step towards integration of the domestic economy with the international economy, an essential to the ongoing process of globalization. Surely free capital flows, like free trade in goods, carry large benefits. But regulating internal as well as external debt accumulation is equally important. The study is a descriptive study using secondary data which focuses on two aspects namely i) the intellectual shift on capital controls worldwide in a fully open capital account and ii) the potential and existing financial stability challenges to fuller capital account convertibility (FCAC) in Indian Rupee. It can be concluded that although both the aspects are in different dimensions and time period, yet the former can be mapped to the latter with respect to the calibrated approach adopted by the Indian government regarding fuller convertibility for capital account transactions as well as capital controls to tackle a crisis.