Dr. Bala and Dr. Bobby Srinivasan’s article in Business Today
Dr. Bala V Balachandran, Dean and Chairman and Bobby Srinivasan, Distinguished Professor - Finance at Great Lakes have compiled an article titled “Full Capital account convertibility will globalize Indian currency”. The article has been published on Business Today's news portal and it covers the issue of Capital Account Convertibility.
Full capital account convertibility will globalise Indian currency
Dr. Bala V Balachandran and Dr. Bobby Srinivasan
Green shoots have begun to appear and the weeds of the past blown away. The International Monetary Fund or IMF has assessed that the Indian economy is poised to grow around 7.9 per cent this financial year, after a 7.4 per cent growth in the last fiscal.
They have also said that India will be fastest growing economy in the world, higher than even China whose growth rate is expected to taper off to 6.4 per cent.
Given the present economic scenario, the government is contemplating permitting capital account convertibility in the next few years. This means that an average citizen could walk up to a bank with Indian rupees and request them to convert to US dollars at the prevailing exchange rate (with no limit on the amount to be converted). This indeed is a most welcome step towards liberalising the use of foreign exchange. If and when it happens, we will join the big leagues comprising developed countries where currency conversion is a day-to-day occurrence.
However, the question to ponder is whether India is ready to take this big step and what the impact on the capital outflow and rupee exchange rate would be. Also, will RBI take a 'laissez-faire' attitude and allow the rupee value to be completely market-determined?
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