From the early 1990s, India embarked on easing capital controls.

Liberalization
emphasised openness towards equity flows, both FDI and portfolio flows. In
particular, there are few barriers in the face of portfolio equity flows. In recent
years, a massive increase in the value of foreign ownership of Indian equities has
come about, largely reflecting improvements in the size, liquidity and corporate
governance of Indian firms. While the system of capital controls appears
formidable, the de facto openness on the ground is greater than is apparent,
particularly because of the substantial enlargement of the current account. These
changes to capital account openness were not accompanied by commensurate
monetary policy reform. The monetary policy regime has consisted essentially of a
pegged exchange rate to the US dollar throughout. Increasing openness on the
capital account, coupled with exchange rate pegging, has led to a substantial loss
of monetary policy autonomy. The logical way forward now consists of bringing
the de jure capital controls uptodate with the de facto convertibility, and
embarking on reforms of the monetary policy framework so as to shift the focus
of monetary policy away from the exchange rate to domestic inflation.