(The author is a Reuters columnist. The opinions expressed are his / her own.)
By James Saft
(Reuters) – India’s imposition of capital controls shows how the prospect of a rollback of U.S. monetary policy is already starting a global war for capital.
India has rolled out a series of capital controls to help support the partially convertible rupee, which has been hammered 13 percent lower so far this year and stands at an all-time low against the dollar. Besides limits on the amounts Indian individuals and business can shift out of the country, India on Monday banned the duty-free import of flat-screen televisions by airline passengers, a move that has the feel of clutching at straws.
Financial markets have been unimpressed by the moves, which started earlier this year, accelerating a shift in the wrong direction as investors weigh the possibility of further capital controls, perhaps even the capturing of foreign money.
Indian shares fell 1.6 percent on Monday, the rupee hit a record low of 62.82 per dollar and 10-year government bond yields rose to 9.23 percent.
To be sure, much of India’s problems are of its own making. The country suffers from slow growth, by emerging market standards, high inflation and crucially, a high current account deficit. Add to that a sclerotic and uncertain legal and political system and development-slowing corruption, and it is easy to understand why India is among the hardest-hit in the emerging-markets selloff.