A number of steps have also been taken to liberalise the capital account covering foreign direct investment, portfolio investment, outward investment including direct investment as well as depository receipt and convertible bonds, opening of Indian corporate offices abroad and the like.
Under the structural conditions that prevail in our economy, an erratic policy course would introduce unwelcome volatility in both inflation and output that would necessitate corrective, countervailing action further down the road. And such harmful side-effects would be compounded in an economy where the inflation process is intrinsically forward-looking.