EU asks India not to impose control over capital inflows

This view was conveyed by the high level EU delegation at the Fourth India-EU Macro-Economic and Financial Services dialogue held here.  At the meeting the EU side has explained to the Indian delegation that any sort of “rigid” control over capital inflows always proves counter-productive in the long run stifling the growth momentum.

“Abnormal surge in capital inflows in any economy no doubt poses problem especially when it faces the heat of rising inflation. In such a scenario some sort of capital control may be necessary,” Director of International Economic and Financial Affairs in the European Commission Peter Bekx said.

“But our stand is that India, as one of the leading emerging economies, which is attracting good chunk of capital inflows, should not opt for any capital control unless the extraordinary macro-economic situation demands so,” he said.

While the capital flooding into fast-growing economies can spur growth, it could also fuel excessive lending, asset price bubbles and financial instability. India believes current level of capital inflows has not attained alarming level that will call for any capital control.