One of the important goals of the economic liberalisation policy is to achieve full convertibility of the Indian rupee. This is being advocated because
A
convertibility of the rupee will stabilize its exchange value against major currencies of the world
B
it will attract more foreign capital inflow in India
C
it will help promote exports
D
it will help India secure loans from the world financial markets at attractive terms
Correct Answer: Option B
Explanation
1. Full convertibility of the Indian Rupee means that the rupee can be freely exchanged for any foreign currency for any purpose (both current account and capital account transactions) at market-determined exchange rates.
2. One of the primary motivations for advocating full convertibility is its potential impact on international trade.
3. Full convertibility simplifies international transactions, reduces currency exchange risks for traders (or allows them to manage it more easily), and makes the pricing of goods and services in international markets more transparent. This is expected to boost trade, particularly exports, by making it easier for Indian exporters to receive payments and compete globally.
4. While convertibility might influence capital flows (B) and potentially stabilize the exchange rate in the long run (A - though short-term volatility can increase), and could indirectly affect loan terms (D), the most direct and intended benefit often cited is the promotion of exports and integration with the global economy.