Assessing External Sustainability in India

Author/Editor:

Tim Callen ; Paul Cashin

Publication Date:

December 1, 1999

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper examines the solvency and sustainability of India’s external imbalances and analyzes the optimality of its capital flows. We use three approaches: an intertemporal model of the current account that allows for capital controls; a composite model of macroeconomic indicators that yields probabilities of future balance of payments crises; and scenarios that examine the path of the current account consistent with the stabilization of India’s external liability-to-GDP ratio. The results indicate that India’s intertemporal budget constraint is satisfied and that the path of its current account imbalances is sustainable, with some support for the optimality (given capital controls) of its external borrowing.

Series:

Working Paper No. 99/181

Subject:

English

Publication Date:

December 1, 1999

ISBN/ISSN:

9781451859171/1018-5941

Stock No:

WPIEA1811999

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

30

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