Please explain me the concept of "convertibility of rupee".Also explain which items are considered in current a/c convertibility and which are included in capital a/c convertibility. Why India does not allow full convertibility on items of capital a/c??
Tanya,
Convertibility of rupee refers that people who have US dollars or any kind of foreign exchange can convert them in rupee terms and vice-versa at a rate determined by market.
Items included in current a/c convertibility are- acceptance of foreign exchange against exports and payment of foreign exchange against imports, various remittances, gifts, foreign exchange for travelling, studies in abroad etc.
Items included in capital a/c convertibility are- loans, investments etc.
Full convertibility on items of capital a/c is still a dream for India. It is because it can only be implemented if the macro economic parameters of the country become stable. A country's current account deficit should be kept at its minimum.
Convertibility of rupee refers that people who have US dollars or any kind of foreign exchange can convert them in rupee terms and vice-versa at a rate determined by market.
Items included in current a/c convertibility are- acceptance of foreign exchange against exports and payment of foreign exchange against imports, various remittances, gifts, foreign exchange for travelling, studies in abroad etc.
Items included in capital a/c convertibility are- loans, investments etc.
Full convertibility on items of capital a/c is still a dream for India. It is because it can only be implemented if the macro economic parameters of the country become stable. A country's current account deficit should be kept at its minimum.