ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Current Account Convertibility

Current Account Convertibility WITH a series of measures already effected to liberalise exchange controls and with the operation of the market- determined exchange rate system since March 1993, the announcement by the Reserve Bank that, effective from August 20, the rupee became fully convertible on current account and that India accepted the status and obligations of Article VIII with the IMF was very much a formality. It is obviously the continuation of the process of globalisation and integrating the Indian economy with the world economy, which the government and the RBI have set before themselves as their objective. However, even conventional wisdom, much of it emanating from the IMF, emphasises certain pre-conditions for the introduction and successful maintenance of convertibility. Domestic price stability without administered price controls, appropriate macro-economic policies,, particularly monetary stabilisation and fiscal consolidation, a realistic exchange rate for the currency and adequate foreign exchange reserves are considered major prerequisites.

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