Question

With reference to the Capital Account Convertibility (CAC) Consider the following statements:

(1) It refers to the abolition of all limitations with respect to the movement of capital from India to different countries across the globe.

(2) It brings about a fair allocation of the income level in India.

(3) It helps in the efficient appropriation or distribution of international capital in India.

Choose the correct answer from the statements given above:

1. 1 & 2
2. 2 & 3
3. 1 & 3
4. 1, 2 & 3

Answer 1

Correct Answer - Option 1 : 1 & 2

The correct answer is 1 & 2.

• Capital Account Convertibility (CAC) refers to the abolition of all limitations with respect to the movement of capital from India to different countries across the globe.
  • It brings about a fair allocation of the income level in India.
  • It helps to convert foreign currency into Indian currency easily and without any restrictions or controls.
  • It allows free mobility of capital into a country from foreign investors.
  • It helps to access hawala money easily.
  • It helps to control the volatility of the foreign exchange market.
  • It gives the ability to invest in foreign markets easily.
  • It improves the access to the global financial market which makes available large funds.