Consider the following statements: The Indian rupee is fully convertible:1. in respect of Current Account of Balance of payment2. in respect of Capital Account of Balance of payment3. into gold Which of these statements is/are correct ?
✓ Correct answer: a) 1 alone
ExplanationStatement 1 is correct : The Indian rupee has been fully convertible on the current account since 1994, meaning that individuals and businesses can freely exchange rupees for foreign currency for trade, services, education, travel, and remit- tances.This was a key reform under the Liberalized Exchange Rate Management System (LERMS) and later formalized under FEMA 1999. Statement 2 is incorrect : The rupee is not fully convertible on the capital account due to restrictions on capital flows, for- eign investments, and external borrowings to prevent excessive volatility and capital flight.India follows a managed convert- ibility regime under RBI regulations.Statement 3 is incorrect : The rupee is not conve-rtible into gold, as India does not follow a gold standard.The exchange rate is determined by market forces and central bank interventions, not by a fixed gold reserve system.286
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