Capital Account Convertibility: An Agenda For Future
India also adopted partial convertibility on current account in 1992-93 and full convertibility on current account in 1994-95. In fact, it is tempting to think of capital account convertibility as the natural follow up to the establishment of convertibility for current account transactions. India is moving step by step towards making the rupee convertible on capital account. The road of convertibility, in India, is a calculated gradual transition path started in the early 1990 just after the introduction of a market determined exchange rate (LERMS) in 1992 followed by full current account convertibility (UERS) in Aug., 1994. At the next stage, a 14 members Sodhani Panel, an expert group on foreign exchange was set up in November 1994. The Sodhani Committee report tabled in 1995 helped develop deepen and widen the forex market through introduction of various products. The third and final step towards forex liberalization was the set up of the committee on capital account convertibility by the Reserve Bank of India (RBI) in 1997 under the chairmanship of former RBI Deputy Governor S.S. Tarapore to "lay the road map" to capital account convertibility. The five members Tarapore Committee on capital account convertibility in May 1997 had chalked out three stages to be completed by 1999-2000. The paper attempts to find the impact of historical development on convertibility issues.
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