Capital Account Convertibility
ASSIGNMENT
FINAL REPORT
TOPIC: CAPITAL ACCOUNT CONVERTIBILITY
ABSTRACT
This report has been prepared to discuss the issue of Capital Account Convertibility (CAC) and India’s experience with it. The concept of CAC and its history and its implications has been discussed. The recommendations of the Tarapore Committee (the committee set up for looking into the issue of CAC) have been presented. Lastly, the progress made towards CAC in India and its implications have been discussed.
SUMMARY
Continuing on the way of economic liberalization and economic reforms and against the pressure by left and democratic parties, the prime minister announced on March 18, 2006 his government’s resolve to move towards full capital account convertibility of Indian rupee ignoring even the advice of his pro-liberal friends. In order to operationalise this, a committee named as Tarapore II under the leadership of S.S.Tarapore, ex-deputy governor, RBI was constituted by the RBI which commenced its work from May 1, 2006 and has since submitted its report on August 31, 2006 to RBI.
This new report has generated a fresh debate on the fuller capital account convertibility (FCAC) and its real implications, particularly for countries like India. This is more so as the new Tarapore Committee II, have themselves admitted in their report that various countries including European Union still continue with several restrictions on FCAC. Even IMF, which has mooted the idea of changing its Charter to include FCAC in its mandate, has shelved the idea in view of its possible dangers. Moreover, the link between FCAC and growth is yet to be firmly established by any stretch of empirical evidence.
First of all, we should try to gather the meaning of full capital account convertibility, as distinct from partial capital account convertibility or convertibility
FINAL REPORT
TOPIC: CAPITAL ACCOUNT CONVERTIBILITY
ABSTRACT
This report has been prepared to discuss the issue of Capital Account Convertibility (CAC) and India’s experience with it. The concept of CAC and its history and its implications has been discussed. The recommendations of the Tarapore Committee (the committee set up for looking into the issue of CAC) have been presented. Lastly, the progress made towards CAC in India and its implications have been discussed.
SUMMARY
Continuing on the way of economic liberalization and economic reforms and against the pressure by left and democratic parties, the prime minister announced on March 18, 2006 his government’s resolve to move towards full capital account convertibility of Indian rupee ignoring even the advice of his pro-liberal friends. In order to operationalise this, a committee named as Tarapore II under the leadership of S.S.Tarapore, ex-deputy governor, RBI was constituted by the RBI which commenced its work from May 1, 2006 and has since submitted its report on August 31, 2006 to RBI.
This new report has generated a fresh debate on the fuller capital account convertibility (FCAC) and its real implications, particularly for countries like India. This is more so as the new Tarapore Committee II, have themselves admitted in their report that various countries including European Union still continue with several restrictions on FCAC. Even IMF, which has mooted the idea of changing its Charter to include FCAC in its mandate, has shelved the idea in view of its possible dangers. Moreover, the link between FCAC and growth is yet to be firmly established by any stretch of empirical evidence.
First of all, we should try to gather the meaning of full capital account convertibility, as distinct from partial capital account convertibility or convertibility
References: 3. ‘Capital account revisited’ Business Line- March 27, 2006. 4. ‘Should India pursue Capital Account Convertibility’ Business Line-March 27, 2006. 5. ‘Capital Account Convertibility is a challenge’ The Times Of India- July 19, 2007. 6. ‘CPM against Full Capital Account Convertibility’ The Times Of India- July 19, 2007. 7. ‘Fuller Capital Account Convertibility: a euphemism for disaster’ People’s Democracy- November 5, 2006. 8. ‘Capital Account Convertibility: Neo-Liberalism’s new threat to India’ People’s Democracy- April 2, 2006. 9. ‘Reject Tarapore panel report, says CPM(M)’ The Hindu- September 5, 2006.