Question

Which of the following factors contribute to full Convertibility ?

• A. Economy is prepared to sustain high growth
• B. Tax reforms and low fiscal deficit
• C. Good Forex reserves and an efficient Central bank
• D. All of the above

Answer 1

Answer: (A)

Economy is prepared to sustain high growth

Full Rupee convertibility means you can buy any foreign currency by exchanging Indian Rupees without any prior approval for any amount. At present we have full convertibility on trade account but not on capital account. This means you can purchase or sell any foreign currency for your day to day business activities. Convertibility is the quality that allows money or other financial instruments to be converted into other liquid stores of value. Convertibility is an important factor in international trade, where instruments valued in different currencies must be exchanged.