Consider the following statements: The Indian rupee is fully convertible I. in respect of Current Account of Balance of Payment. II. in respect of Capital Account of Balance of Payment. III. into gold. Which of these statements is/are correct?
- AI aloneCorrect
- BIII alone
- CI and II
- DI, II and III
Explanation
The correct answer is A because current account convertibility means the freedom to convert domestic currency into foreign currency for trade in goods and services, payment of interest, and remittances. In India, full current account convertibility was introduced in 1994.
Statement II is incorrect because India only has partial convertibility on the capital account. There are still many restrictions on the movement of investment assets and debt by individuals and companies to maintain financial stability.
Statement III is incorrect because the Indian rupee is a fiat currency and is not convertible into gold. No modern major economy uses the gold standard for currency conversion today. Therefore, only statement I is correct.
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