Consider the following statements 1 Capital Account Convertibility allows anyone to freely move...........

Explanation:

There is no formal definition of capital account convertibility (CAC). However, the Tarapore committee set up by RBI to go into the question of CAC in 1997 defined it as the freedom to convert local financial assets into foreign financial assets and vice versa at market determined rates of exchange. Simply put, CAC allows anyone to freely move from local currency into foreign currency and back. So, statement 1 is correct.

Current Account Convertibility allows free inflows and outflows of foreign currency for all purpose including resident Indians buying foreign goods and services (imports), Indians selling foreign goods and services (exports), Indians receiving and sending remittances, accessing foreign currency for travel, study abroad, medical tourism purpose etc.

Capital Account Convertibility is widely regarded as the hallmark of developed countries. It is also seen as the major comfort factor for foreign investors since it allows them to reconvert local currency back into their own currency and move out from India. Presently, India has current account convertibility. This means one can import and export goods or receive or make payments for services rendered. However, investments and borrowings are restricted. Hence, statement 2 is correct.

Statement 3 is incorrect.

The flip side of capital account convertibility is that it can destabilise an economy due to massive capital flows in and out of the country.

Must read:

https://www.financialexpress.com/archive/whats-capital-account-convertibility/129382/