Question

44. Consider the following statement about Convertibility of rupee.
1. It implies convertibility of rupee into gold
2. Allowing the value of rupee to be fixed by market forces.
3. Freely permitting the conversion of rupee to other currencies and vice versa.
4. Developing an international market for currencies in India
Which of the above statement(s) is/are incorrect?

• A. Only 1, 2 and 3
• B. Only 1, 3 and 4
• C. Only 2, 3 and 4
• D. Only 1, 2 and 4

Answer 1

The correct option is D Only 1, 2 and 4

Rupee convertibility system allows amount of rupee which gets converted to different currency with a view of foreign exchange. It means that you can convert foreign exchange such as US dollars, Pound, Sterlings etc. into Indian rupees and vice-versa at market determined rate of exchange. Convertibility of rupees is not applicable on asset. The economic value of rupee in the market is different from convertibility. Convertibility of rupee is not related to building relations for currencies in market.