Stiglitz asks India to check `hot money' inflows

Nobel Prize-winning economist Joseph Stiglitz has called on Indian authorities to apply capital control measures on short-term flows of "hot money" to ensure economic stability, in the wake of the United States' adopting an ultra-loose monetary policy.

Stiglitz, who won a Nobel Prize in economics in 2001, said it was worrying that countries like India had no plans for capital controls as speculative money was adding pressure to the economy and fuelling inflationary pressure in certain market segments, such as property.

"Where I do have a worry is countries like India, where they are debating how much intervention in the market we should have. And there are people who say in India we shouldn't have capital controls, even though Brazil's done it, China's done it."

He said the way to ensure economic stability is for countries to curb speculative inflows, but allow long-term investments that create jobs.

In this context, he asked developing countries to emulate China's policies for controlling speculative inflows to stabilise its economy. China has emerged the second-largest economy in the world after the US and the fastest growing among emerging economies, he pointed out.

"China has had capital controls on short-term flows that have worked, not perfectly, but have worked to stabilise these short-term flows. But, at the same time, it's been very open to long-term investments," he said.

While some emerging countries such as Brazil and Thailand, have implemented some capital control measures to curb huge inflows of loose liquidity, Stiglitz said countries should be ready with measures to check a second wave of hot money flows unleashed by a second round of quantitative easing by US monetary authorities.