India implements currency controls to stop money flight as economy weakans...

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An honorable member of the Coffee Shop Has Just Posted the Following:

Some signs of trouble in various Asian economies appearing....
Malaysia and Singapore's domestic debt levels very high
Any shift in interest rates can trigger a flight from Asia.....
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India's surprise decision to reimpose capital controls on local companies and individuals this week to protect the ailing rupee was prompted by warnings of an imminent surge in capital flight, according to senior policy makers in the capital.

The move on Wednesday night appears to have failed, at least in the short term. The rupee fell to a record low of Rs62.03 to the dollar on Friday once markets reopened after a holiday.

But the curbs on outward direct investment - which reversed a liberalisation of six years ago - reflected the desperate search by Indian authorities for a way to deal with the toxic combination of a falling rupee, a sharp slowdown in growth, swollen current account and budget deficits and persistently high inflation.

"We have to stop the haemorrhaging. We need to stabilise the patient," one senior official said Friday.

Another complained that Indians had set up "shell companies" to take advantage of corporate allowances for outward investment, while financial advisers in the Middle East had told individuals to use their maximum annual personal allowances immediately.

"People were getting calls to take out $200,000 right now and bring it back when the rupee reaches 70 [to the dollar]," the official said.

(Read more: What's really holding back growth in India)

The controls were the latest of a series of hastily devised measures to bolster the rupee - others include three rounds of duty increases on gold imports - but they have only deepened the sense of crisis afflicting the Indian economy.

"It seems that the government is groping in the dark, and coming up with measures without any serious consideration from industry, or people who can tell them the consequences of their actions," said DG Shah, secretary-general of the Indian Pharmaceutical Alliance. "The capital controls are a classic example."

Indian drugmakers have been aggressively acquiring small drug companies abroad to use their foreign distribution networks. Such plans could be impeded by the new restrictions, although officials insist they are not targeting bona fide corporate investors.


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