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Finalppt Currencyconvertibility 111003105349 Phpapp02
Finalppt Currencyconvertibility 111003105349 Phpapp02
capital account
Convertibility
Presented by-: JOGINDER
Roll no-: 16
Currency Convertibility
What it is ?
Convertibility essentially means the ability
of
residents
and
non-residents
to
exchange domestic currency for foreign
currency, without limit, whatever be the
purpose of the transactions.
Types Of Currency Convertibility.
Fully convertible currency.
Partially convertible currency.
Non-convertible currency.
Rupee
Convertibi
lity
Current Account
Refers to currency convertibility required in
case of transaction relating to exchange of
goods and services, money transfer and all
those transaction that are classified in
current account
Transactions relating to:
- Exchange of goods and services
- Money transfers
- Transactions that are classified in the
Current Accounts.
In Short, Current account includes all
transactions, which give rise to or use of our
National Income.
Current Account
Transactions
All imports and exports of merchandise.
Invisible Exports and Imports
Inward private remittances (to & from)
Pension payments (to & from)
Government Grants (both ways)
Capital account
convertibility
Capital Account
Transactions
Capital Direct Foreign
Investments.
Investment in securities.
Government Loans.
Short-term investments.
Real estate
Production
facilities
Equity
investment.
Other
investment.
Holdings in
loans
Bank
accounts
Currencies
Diversification
NRI Remittances
Foreign Investment
Catalyst for financial market, institutional
development, competition, new
technologies & discipline macroeconomic policies.
Reduction in the size of Black money.
Induces competition against Indian
finance.
Tarapore committee
Committee on capital account credibility, set up
by RBI(Reserve Bank of India) under the
chairmanship of former RBI deputy governor
S.S. Tarapore.
Economists Surjit S Bhalla, M G Bhide, R H Patil,
A V Rajwade and Ajit Ranade were the
members of the Committee.
The report submitted by this Committee in the
year 1997 proposed a three-year time period
(1999-2000) for total conversion of Rupee
Contd...
Reasons for the introduction of CAC in India:
It was meant to ensure total financial mobility in the country
It also aimed in the efficient appropriation or distribution of
international capital in India
Pre - conditions:
The fiscal deficit needs to be reduced to 3.5% of the GDP
Inflation rates need to be controlled between 3-5%
Non-performing assets (NPAs) need to be brought down to 5%
Cash Reserve Ratio (CRR) needs to be reduced to 3%
A monetary exchange rate band of plus minus 5% should be
instituted
Kelkar committee
This committee is headed by vijay
kelkar.
This committee emphasis
on fiscal consolidation.
Fiscal consolidation
Fiscal consolidationis a
reduction in the underlying
fiscal deficit. It is not aimed at
eliminating fiscal debt.
Observation of kelkar
committee
High fiscal tends to
I. High inflation.
II.Employment and inflation be
politically disability for the
government.
current
A current account
refers to goods and
services income and
current transfers.
A current account
convertibility allow
free inflow and outflow
for all purposes other
purposes such
investment loans.
Any Questions...?