New Delhi, May 21 -- Should India tighten capital controls in response to its dollar crunch? Not unless the country faces a dire emergency. That's a key lesson from the 'taper tantrum' crisis of 2013.

In an oped for Hindustan Times, Duvvuri Subbarao, who was the Reserve Bank of India's (RBI) governor back then, recounts the effect of a small tweak. The central bank cut the annual outward remittance cap for resident Indians by $50,000 to $200,000.

"The market reaction was swift and brutal," he writes, "The rupee fell 10% in less than two weeks." RBI's decision was interpreted as "a reversal of India's capital account liberalization policy."

Indeed, given how hard it is to second-guess how the minds of market participants work in times o...