Question

The Capital Account Convertibility of the Indian Rupee implies:

(a) that the Indian Rupee can be exchanged by the authorised dealers for travel

(b) that the Indian Rupee can be exchanged for any major currency for the purpose of trade in goods and services

(c) that the Indian Rupee can be exchanged for any major currency for the purpose of trading financial assets

(d) None of the above

Answer 1

(c) Capital account convertibility means free conversion of cross-border capital flows. Any entity can convert domestic currency into hard currency at the prevailing market rate and take hard currency out of the country without the need of offering any explanation.