Which of the following statements is correct with respect to the convertibility of Indian rupee?
It is convertible on capital account
It is convertible on current account
It is convertible both on current and capital account
None of the above
Answer is Right!
Answer is Wrong!
This question was previously asked in
UPSC CAPF – 2013
– Convertibility is typically discussed in two parts: current account convertibility and capital account convertibility.
– Current account convertibility allows individuals and businesses to freely convert domestic currency into foreign currency for current account transactions, which include trade in goods and services (exports and imports), remittances, interest payments, and dividends. The Indian Rupee is fully convertible on the current account.
– Capital account convertibility allows individuals and businesses to freely convert domestic currency into foreign currency for capital account transactions, which involve cross-border movement of capital, such as investments (FDI, FPI), loans, and acquisition of assets. The Indian Rupee is *not* fully convertible on the capital account; there are restrictions and regulations imposed by the RBI on various capital transactions. India has moved towards greater capital account convertibility but has not achieved full convertibility due to concerns about potential financial instability.