Consequently, while capital account liberalisation process is ongoing, we are proceeding cautiously with regard to certain types of transactions in order to avoid any significant disruptions arising from unregulated short-term capital flows. Liberalisation also has implications for the independence of monetary policy.
Whereas, domestic economic circumstances might indicate the need to keep interest rates low, if regional rates are high, in the context of an open capital account, then there is more pressure to raise rates in order to keep money at home, even though the domestic cost situation would suggest that interest rates be kept low so as to reduce the cost of operations of businesses.