How can capital controls be evaded?
The current account has seen sharp growth since 1991 and spectacular growth since 2000 after which it has increased by nearly 2.5 times as both imports and exports have risen sharply. In 2004-05, inflows and outflows on the current account added up to $313 billion, or 48% of GDP. As a country’s trade integration with the world increases, there are innumerable nodes through which money flows in and out. To account for the purpose of each flow becomes difficult. For example, gems and jewellery and software are among India’s biggest exports.
