The problem is not that India is not adequately reformed, but that past reforms have resulted in its integration through flows of finance with global capital. This makes the perceptions and behaviour of global capital, whether stimulated by India’s fundamentals or not, of importance to the country. And unlike China, a lot of the reserves that insure the country against adverse global responses are not earned through current account surpluses, but are drawn from what foreign investors have delivered in the past. Keeping legacy capital satisfied is crucial for stability.
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