1. ‘Full capital account convertibility will make India leading economy’: Jayant Sinha

‘Full capital account convertibility will make India leading economy’: Jayant Sinha

'There are many policy measures and many things that we have to do over a period of time...

By: | New Delhi | Updated: April 15, 2015 2:44 PM
capital account convertibility, jayant sinha, raghuram rajan, rbi, jayant sinha ministry of finance, economic policy, policy, capital account, capital account convertibility india, india news, business news, economy

‘There are many policy measures and many things that we have to do over a period of time, if indeed India has to become a leading global economy’, Minister of State for Finance Jayant Sinha said. (PTI)

India needs to take many policy measures over a period of time, including moving towards full capital account convertibility, to become a leading global economy, Minister of State for Finance Jayant Sinha has said.

“There are many policy measures and many things that we have to do over a period of time, if indeed India has to become a leading global economy… We have to make it possible for our capital markets to be broader, deeper and for that to happen, capital account convertibility also becomes important,” Sinha told reporters at an event here.

The Minister said that India has became more and more open in the last few years.

“Definitely, we have to play our rightful, responsible role in the global economy, we have to move in that direction (capital account convertibility),” Sinha said.

The Minister’s statement assumes significance as Reserve Bank (RBI) Governor Raghuram Rajan had recently said that the central bank is looking at allowing full capital account convertibility in a few years.

Stating that the RBI is fairly open to capital inflows, the Governor had said: “The only place today that we have some restrictions is inflows into debt, especially very short-term debt.”

Full capital convertibility means a foreign investor can repatriate his money into his own local currency at will, which is not allowed in the country as of now.

Finance Minister Arun Jaitley had also recently launched the country’s first international finance centre in Gujarat.

Full rupee convertibility can go a long way in the effective functioning this global financial services hub.

It may be noted that many analysts had credited RBI for its policy of partial capital control, which helped it tide over the impacts of the currency meltdown in many South Asian economies which had full capital convertibility in 1997-98.

In May-August 2013 also, capital control helped the country from going to the dumps following the taper talks by the US Federal Reserve. Even then the country saw as many as over USD 20 billion being pulled out by foreign investors.

Following the June 1991 liberalisation, the government and the RBI have been progressively lifting curbs on capital flows, which saw the FII investment into domestic debt rise to USD 31 billion as of now.

Stressing that the old age traditional support system for retired people is increasingly eroding in India, Sinha highlighted on the need for making National Pension System (NPS) universal.

“We are going to support retired people. If we will make NPS universal, then we will have a pool of savings, which can finance infrastructure projects,” he said.

The Minister said that the Indian equity markets are one of the most volatile markets in the world and if we will make our pension market smooth and steady, then volatility in equity market will be less and people will start investing more in stock markets.

NPS was initially introduced for the central government employees joining on or after January 1, 2004.

Later, in order to facilitate organised entities including public sector organisations, a customised version of NPS, known as NPS-Corporate Sector Model was introduced in December 2011.

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Tags: Jayant Sinha
  1. Dr.T.V.Gopalakrishnan Krishnan
    Apr 16, 2015 at 6:25 am
    The thought for going in full convertibilty comes without having full understanding of the implications of full convertibilitydian Economy has not reached that stage and it will take a few more years to think of going in for full convertibility of rupee.The inflows and out flows of foreign exchange should emanatew fully from trade and commerce and there should be strong economic fundamentals like comfortable inflation level, fiscal and current account deficit,good backing of foreign exchange reserves, tolerable external debt and strong and dependable GDP growth.Here as it is, we have heavy black money acmulation both in domestic and international markets, uneven flows of foregn exchange, and a tendency to divert funds meant for production and infrastructure to short term speculative gains and total laxity in governance standards.Just expectations and rhetoric statments cannot be misunderstood for a strong conducive and favorable environment to go in for full converibiity. It is nothing but an iinvitation for disaster which can be and should be avoided. The demand for conversion of rupee into dollars cannot be easily met and the inflows and outflows of forex from a speculative angle cannot be predicted and prevented to ensure stability of rupee. Jumping without a safety net from any height can only injure or kill the person.Better to be cautious .
    Reply
    1. S
      Sadasivan
      Apr 15, 2015 at 6:46 pm
      "Full capital convertibility means a foreign investor can repatriate his money into his own local currency at will, which is not allowed in the country as of now." With the Derivatives,which are UNREGULATED and Opaque around and their misuse to manite Currencies,it is foolish to,even, think of the above. LIBOR scam is but only one example.
      Reply
      1. S
        Sadasivan
        Apr 15, 2015 at 6:50 pm
        Global Finance is suspect,as of now,what with the Derivatives and their misuse in LIBOR Scam etc. India better avoid this and keep itself aloof from the present suspect Global Finance,till the needed reforms are in place like BANNING of the Derivatives. Please google for:- 1.The 2008 Global financial crash due to the Derivaties in the USA 2.The $ 1.5 Quadrillion Derivatives bombs 3.Currency scams LIBOR
        Reply
        1. S
          Sadasivan
          Apr 15, 2015 at 11:06 pm
          LIBOR like scams will make this idea foolish.Derivatives have to be banned first.The Global Monetary System now is suspect.reforms are neededdia will be bankrupted,if this idea is followed in the present Global Monetary set up.
          Reply

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