Capital Flight and Pressure on the Indian Rupee

The outbreak of hostilities in the Persian Gulf and the closure of the Strait of Hormuz have created profound uncertainty in global markets, leading to capital flight from emerging market economies such as India.

What is Capital Flight?

  • It refers to the large-scale movement of financial assets and capital out of a country, typically triggered by economic instability, geopolitical uncertainty, or unfavourable monetary conditions.
  • It often results in currency depreciation, weakening of foreign exchange reserves, and pressure on the domestic economy.

What Triggers Capital Flight

  • Risk Perception: Investors perceive heightened risk (e.g., the 2026 Persian Gulf hostilities) and sell local ....
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