ABSTRACT
This chapter examines the magnitude of capital flight from the Indian economy evident from the balance of payments data. The measuring procedure is based on the factors that motivate capital flight. In order to gain control over the situation, the Prime Minister declared a national emergency in mid-1975, arrested her enemies and instigated price controls. These dictatorial measures triggered capital flight. The experience of the Philippines illustrates the role political and economic instability assumed in explaining the build-up of external debt and capital flight. In India it was the threat to incomes and wealth derived from rent-seeking, bribery and corruption which define the motivating factors inducing capital flight from the Indian economy. Capital flight occurs as a consequence of trade liberalization policies. The period for which capital flight was estimated for the Indian economy was constrained by the availability of data and the problem of interpreting available data.
