o Rupee Convertibility

o Setting up of a separate Enforcement Directorate (ED) for trying out criminal offenses in foreign exchange

o Borrowings by the corporate sector

3.1.2.2. Capital Account Convertibility (CAC)

♤ Currency convertibility is the ease with which a country's currency can be converted into gold or another currency. It means freedom to convert local financial assets into foreign ones at market-determined exchange rates.

♤ At present, India allows full convertibility in current account but only partial convertibility in capital account.

♤ S. S. Tarapore Committee has recommended to move towards full CAC.

♤ Should India move towards full Capital Account convertibility? Positives:

o RBI recently allowed Indian companies to raise rupee debt offshore.

o Convertibility would facilitate further liberalisation and increase foreign investment.

o Increasing openness to international trade may create opportunities for avoiding capital account restrictions.

o It can lead to free exchange of currency at lower rates. Also, it promotes unrestricted mobility of capital – which may impact the economy in times of global recession.