Here’s why India may end up choosing capital flows over current account flows
India may end up implicitly choosing a stance of preferring capital flows over current account flows, if it sets a GDP target in a foreign currency Financial Express A currency serves two purposes: medium of exchange and store of value. We have explored this idea in these pages in a different context earlier when we looked at the relationship between legacy finance firms and fintech companies. Today, we explore the implication of this definition and purpose of a currency in the context of a country’s financial relationships with other countries. For a country, its relationship with the world flows through two accounts: capital account and current account. For sake of simplicity, capital account refers to all the monies transferred on account of buying or selling of assets like equity, debt, property, etc, and current account includes all the trade in goods and services including investment incomes and remittances. It can readily be seen that when a country engages with the world