Foreign Exchange, FDI & External Debt (Part – I)

As a part of new economic reforms initiated in 1991, India made rupee partially convertible on current account from March, 1992 under the 'Liberalized Exchange Rate Management Scheme' (LERMS) involving dual exchange rates (60% by market-determined exchange rate and 40% by RBI at fixed exchange rate). From March, 1993, rupee was made convertible for all trade in merchandise. In March, 1994, even invisibles and remittances from abroad were allowed to be freely convertible. In August, 1994, India accepted IMF Article VIII and thus the rupee officially became convertible on the current account.

After that, India has come a long way in liberating the capital account transactions also in the last three decades and currently has partial capital account convertibility. Fully convertibility of Indian rupee (on both current and capital accounts) is being advocated because that will allow free mobility of capital in the country from the foreign investors and will attract more foreign capital inflow. It will also enable the domestic companies to raise more funds from abroad. Hence, full convertibility of rupee would facilitate growth and higher foreign investment.

As a part of new economic reforms initiated in 1991, India made rupee partially convertible on current account from March, 1992 under the 'Liberalized Exchange Rate Management Scheme' (LERMS) involving dual exchange rates (60% by market-determined exchange rate and 40% by RBI at fixed exchange rate). From March, 1993, rupee was made convertible for all trade in merchandise. In March, 1994, even invisibles and remittances from abroad were allowed to be freely convertible. In August, 1994, India accepted IMF Article VIII and thus the rupee officially became convertible on the current account.

After that, India has come a long way in liberating the capital account transactions also in the last three decades and currently has partial capital account convertibility. Fully convertibility of Indian rupee (on both current and capital accounts) is being advocated because that will allow free mobility of capital in the country from the foreign investors and will attract more foreign capital inflow. It will also enable the domestic companies to raise more funds from abroad. Hence, full convertibility of rupee would facilitate growth and higher foreign investment.

As a part of new economic reforms initiated in 1991, India made rupee partially convertible on current account from March, 1992 under the 'Liberalized Exchange Rate Management Scheme' (LERMS) involving dual exchange rates (60% by market-determined exchange rate and 40% by RBI at fixed exchange rate). From March, 1993, rupee was made convertible for all trade in merchandise. In March, 1994, even invisibles and remittances from abroad were allowed to be freely convertible. In August, 1994, India accepted IMF Article VIII and thus the rupee officially became convertible on the current account.

After that, India has come a long way in liberating the capital account transactions also in the last three decades and currently has partial capital account convertibility. Fully convertibility of Indian rupee (on both current and capital accounts) is being advocated because that will allow free mobility of capital in the country from the foreign investors and will attract more foreign capital inflow. It will also enable the domestic companies to raise more funds from abroad. Hence, full convertibility of rupee would facilitate growth and higher foreign investment.

As a part of new economic reforms initiated in 1991, India made rupee partially convertible on current account from March, 1992 under the 'Liberalized Exchange Rate Management Scheme' (LERMS) involving dual exchange rates (60% by market-determined exchange rate and 40% by RBI at fixed exchange rate). From March, 1993, rupee was made convertible for all trade in merchandise. In March, 1994, even invisibles and remittances from abroad were allowed to be freely convertible. In August, 1994, India accepted IMF Article VIII and thus the rupee officially became convertible on the current account.

After that, India has come a long way in liberating the capital account transactions also in the last three decades and currently has partial capital account convertibility. Fully convertibility of Indian rupee (on both current and capital accounts) is being advocated because that will allow free mobility of capital in the country from the foreign investors and will attract more foreign capital inflow. It will also enable the domestic companies to raise more funds from abroad. Hence, full convertibility of rupee would facilitate growth and higher foreign investment.

As a part of new economic reforms initiated in 1991, India made rupee partially convertible on current account from March, 1992 under the 'Liberalized Exchange Rate Management Scheme' (LERMS) involving dual exchange rates (60% by market-determined exchange rate and 40% by RBI at fixed exchange rate). From March, 1993, rupee was made convertible for all trade in merchandise. In March, 1994, even invisibles and remittances from abroad were allowed to be freely convertible. In August, 1994, India accepted IMF Article VIII and thus the rupee officially became convertible on the current account.

After that, India has come a long way in liberating the capital account transactions also in the last three decades and currently has partial capital account convertibility. Fully convertibility of Indian rupee (on both current and capital accounts) is being advocated because that will allow free mobility of capital in the country from the foreign investors and will attract more foreign capital inflow. It will also enable the domestic companies to raise more funds from abroad. Hence, full convertibility of rupee would facilitate growth and higher foreign investment.

As a part of new economic reforms initiated in 1991, India made rupee partially convertible on current account from March, 1992 under the 'Liberalized Exchange Rate Management Scheme' (LERMS) involving dual exchange rates (60% by market-determined exchange rate and 40% by RBI at fixed exchange rate). From March, 1993, rupee was made convertible for all trade in merchandise. In March, 1994, even invisibles and remittances from abroad were allowed to be freely convertible. In August, 1994, India accepted IMF Article VIII and thus the rupee officially became convertible on the current account.

After that, India has come a long way in liberating the capital account transactions also in the last three decades and currently has partial capital account convertibility. Fully convertibility of Indian rupee (on both current and capital accounts) is being advocated because that will allow free mobility of capital in the country from the foreign investors and will attract more foreign capital inflow. It will also enable the domestic companies to raise more funds from abroad. Hence, full convertibility of rupee would facilitate growth and higher foreign investment.

As a part of new economic reforms initiated in 1991, India made rupee partially convertible on current account from March, 1992 under the 'Liberalized Exchange Rate Management Scheme' (LERMS) involving dual exchange rates (60% by market-determined exchange rate and 40% by RBI at fixed exchange rate). From March, 1993, rupee was made convertible for all trade in merchandise. In March, 1994, even invisibles and remittances from abroad were allowed to be freely convertible. In August, 1994, India accepted IMF Article VIII and thus the rupee officially became convertible on the current account.

After that, India has come a long way in liberating the capital account transactions also in the last three decades and currently has partial capital account convertibility. Fully convertibility of Indian rupee (on both current and capital accounts) is being advocated because that will allow free mobility of capital in the country from the foreign investors and will attract more foreign capital inflow. It will also enable the domestic companies to raise more funds from abroad. Hence, full convertibility of rupee would facilitate growth and higher foreign investment.

Current account convertibility refers to the freedom to convert rupees into other internationally accepted curren- cies and vice-versa/or without any restrictions. Similarly, capital account convertibility means the freedom to conduct investment transactions without any constraints. Typically, it would mean no restriction on the amount of rupees anyone can convert into foreign currency or vice-versa for the purpose of trading financial assets. Indian rupee is fully convertible on current account from August, 1994. As far as the capital account convertibility of rupee is concerned, India has come a long way in liberating the capital account transactions in the last three decades and currently has partial capital account convertibility.