India has to move towards full capital account convertibility of the rupee as it strives to become one of the top three-four economies of the world in the next decade, minister of state for finance Jayant Sinha said on Wednesday, backing a similar statement made by Reserve Bank of India (RBI) governor Raghuram Rajan last week.

“If we are going to be among the top 3-4 economies, we have to make it possible for our capital market to be broader, deeper and if that is to happen, capital account convertibility also becomes important,” Sinha said.

Delivering Kale Memorial Lecture at the Gokhale Institute of Politics and Economics on April 10, Rajan had said rupee might become fully convertible in the next few years.

At present, India has current account convertibility, but no full capital account convertibility for the rupee.

Full capital account convertibility (CAC) implies freedom to convert the rupee, both in terms of outflows and inflows, for capital transactions or freedom to convert local financial assets into foreign financial assets and vice-versa at a market-determined exchange rate.

Pointing out that RBI is fairly open to capital inflows, Rajan had said that some controls would be required on very short-term debt flows for reasons of financial stability.

Sinha said the government and RBI have taken a number of steps in recent years to move towards full CAC. “How that (full CAC) is going to happen, what are the specific steps that are going to be undertaken over the next decade or so… we have to see how all of that evolves,” the minister said.

The Financial Sector Legislative Reforms Commission in a report has suggested the timing and sequencing of capital account liberalisation should be chosen by the policymakers, but recommended there should be a restriction on foreign ownership of national assets.

However, moving to the full CAC requires better macroeconomic management, such as bringing down the fiscal deficit to a sustainable level and keeping inflation under control.

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