Dr YV Reddy has given a nice speech on the subject at Hyderabad on Jan 3, 2007.
He discusses the economic thinking behind the subject and offer Indian perspective. He says a pragmatic approach has to be taken and one cannot rely on the developed country model.
The effectiveness of capital account management should be viewed from several angles. Let me mention a few. First – impact on exchange rate expectations. Second – the counterfactual, namely what could have happened without capital controls at a particular juncture? Third – the short term impact versus the long term effectiveness. Fourth – the overall regime of current account management in the country concerned, to thwart capital account transactions in the guise of current account. The regimes governing repatriation and surrender are also relevant here. Fifth – the administrative framework and overall effectiveness of administration in the country, in a given legal and institutional framework. Finally, by all accounts, in terms of both growth and stability, China and India, who do manage capital account rather actively, have performed exceedingly well in all the recent years.
Read the entire speech for more details. And yes, the empirical research he mentions I have covered it earlier here. So, now you know I have been advising you to read the right things. :-)