Currency convertibility is the ease with which a countrys currency can be converted into gold or ano...........

Economic Affairs Balance of Payments

Currency convertibility is the ease with which a country's currency can be converted into gold or another currency and vice-versa. In the context of this consider the following statements about Convertibility of rupee and identify the correct one/ones

1. Given the volatile nature of Trade Account and Current Account they are only partially convertible in India

2. In order to boost Foreign Capital inflow, Capital Account is fully convertible in India

Select the correct answer using codes given below

1 only

2 only

Both are correct

None is correct

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Explanation:

Trade account is for imports and exports of goods and is fully convertible in India since 1993-94.
Current account is related to services and remittances and is also fully convertible since 1994.
But given the destabilizing effect flight of FDI can have (as in the case of South East Asian crisis) capital Account is only partially convertible in India. For ex- FDI is also automatic and also through approval route (FIPB/CCEA)