India's Foreign Exchange Reserves: An Embarrassment of Riches

India's capital account is too open. There are flows that can destabilise the non-financial (real) sector. There is (almost) full convertibility for inflows but restrictions on outflows. While the composition of the capital inflows has changed over the last decade, the capital account has remained in surplus. Some flows, like FDI, add to productive capacity and/or facilitate the transfer of technology and are not volatile. There are other flows that are more volatile, e g, FII flows and NRI deposits. What are the problems that such flows pose?