We need to remember that a business model which looks robust in conditions of rising asset values and abundant liquidity may not be so when the economic environment changes.
High gross flows make economy more susceptible to such reversals and as such we need to continue to maintain adequate buffers. In the current context, a high CAD has been absorbing much of the capital flows in aggregate terms. The concerns, however, arise on account of the composition of flows coupled with lower order of reserves accretion and faster increase in external liabilities.