PUNE Nande Campus

S. No. 44/1, 44 1/ 2, Nande Village
Pashan Sus Road, Taluka Mulshi
Pune 412 115
Dolamani Sahu: 07757029572
  020 66754651/64
  07757029571
  020 66754678
  admissions@isbm.ac.in

PUNE Mulshi Campus

Mulshi Group of Institute
Gat No. 237-243
Near Malhar Machi Resort
Sambhave Tal Mulshi
Pune 412108
7757029572

KOLKATA Campus

A constituent of People's Empowerment Group Foundation
Premises No. 330/2, Pujali Trunk Road,
Ward No. 9, Mouza – Rajibpur, JL No. 43, 
Police Station – Budge Budge, 
Kolkata 700138, West Bengal
Landline: +91 33 24820019
Biswanath Thakur: 09230562572
Baishakhi Chatterjee: 09230562601
  admissions.kolkata@isbmk.edu.in

BANGALORE Campus

Plot No. 241
Sompura Industrial Area
Niduvanda Village
Sompura Hobli, Nelamangala Taluk
Bangalore 562132
07757029572
080-29717901/ 080-27700169 / 27700170
  admissions@isbm.ac.in


Bangalore City Office

301, Anand Chambers,
# 27 Elephant Rock Road,
In front of Central library,
3rd Block, Jayanagar
Bangalore - 560 011
Dolamani Sahu: 07757029572
Landline no : 080 41612929

Lucknow City Office

B-1/96, Near Jaipuriya College,
Vineet Khand, Gomti Nagar,
Lucknow – 226010
Shimul Banerjee: 09519218833
Avijit Banerjee: 09830991821

Gurgaon City Office

Rectangle No. 41,
Maidawas Sector – 64
Gurgaon, Haryana – 122101
Vijay Kumar: 09899115369
Avijit Banerjee: 09830991821

We & They
The Need To Excel At Cross-Cultural Communication

Capital Account Convertibility

Student

Capital Account Convertibility (CAC) means the freedom to convert Rupees to foreign currencies and back for capital transactions i.e. purchase and sale of assets. In other words CAC gives the sanction to convert local financial assets into foreign financial assets at market determined exchange rates and vice versa without the permission of the Central Bank (RBI), thus leading to free exchange of currency at lower rates and an unrestricted mobility of capital.

Thus in the current stream of events, where globalization has become the buzzword and financial liberalization has become synonymous with ‘developed economies’, the key issue that is to be considered, is whether India is ready to plunge towards CAC. Over the years since 1991, a large number of financial reforms have taken place and a lot of relaxation has been made on controls by RBI in case of Capital Accounts also, but still permission is required for large purchases of capital goods and for External Commercial Borrowings. Suppose one wants to import plant and machinery or invest abroad and needs a large amount of foreign exchange say $10 million, the importer will first have to obtain the permission of RBI. If approved this becomes a “capital account transaction“.

CAC is widely regarded as one of the hall marks of a developed economy. It is also seen as a major comfort factor for overseas investors since anytime the local currency can be converted into foreign currency and the money can be repatriated out of India. India presently has Current Account Convertibility, which means that foreign exchange can be easily accessed for import and export of goods and services without restrictions and partial CAC in terms of FDI, portfolio investment etc.

Once a country eases capital controls, typically there is a surge of capital flows, both long term in projects as well as short term in investments. This gives boost to the economy and also rejuvenates the stock markets.CAC is also stated to bring with it greater discipline on the part of the government in terms of reducing excess borrowings and rendering fiscal discipline.

The downside of CAC is the prospect of speculative outflows at short notices which may affect the economy very seriously. Only vibrant economies, having done structural and financial reforms, following sound macro economic policies and considerable amount of foreign exchange reserves should go for CAC. Mexico’s currency crisis and the East Asian crisis are examples of the ill effects of CAC.

Significantly India and China are the two most growing countries who still do not have CAC. When questioned on this recently, both the RBI governor and his deputy expressed their views that it is an inescapable choice and India has to go for it in a short number of years to integrate fully with the global economy.

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