[sbinews] Full convertability - NO for now

  • From: sbistcbangalore@xxxxxxxx
  • To: sbinews@xxxxxxxxxxxxx
  • Date: Wed, 24 Dec 2003 10:50:46 +0500

No full convertibility for now: FM

NEW DELHI : The country’s foreign exchange reserves have topped the $100-bn 
mark and are mounting, but full convertibility of the rupee on the capital 
account will have to wait considering some of the fiscal constraints India is 
facing, according to finance minister Jaswant Singh. 

The FM would like to go along with the Tarapore Committee’s recommendations on 
full convertibility. The committee had recommended the implementation of a 
schedule for this over a three-year period, subject to certain pre-conditions 
and signposts. These include a reduction in the fiscal deficit-GDP ratio to 
3.5%, a mandated rate of inflation of 3-5% during this period and, most 
importantly, strengthening of the financial system. 

Unless these signposts are met and fiscal indicators offer a better comfort 
level, there would not be a move towards full convertibility, Mr Singh 
indicated. As he said, for all practical purposes, the rupee is convertible. 

The high level of foreign exchange reserves will help the country economically, 
psychologically and diplomatically, Mr Singh said. Indian corporates could also 
benefit as it would help them borrow at competitive rates on the back of high 
reserves. The government has also chosen to utilise the reserves by pre-paying 
part of its external debt — a total of $7bn has already been paid. 

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