Question 1 · 10 marks · 163 words written
Opening
India has full current account convertibility but only partial capital account convertibility in order to insulate Indian economy from global economic downturnings.
Internationalisation of Rupee:
Body · points
(1) This will lead to increase in capital inflow leading to increase in forex (2) Increased foreign direct investment (3) Decrease the dependence of India on dollars (4) Can lead to trade deals based on rupee exchange (5) Improve trade relations of India However, it has its own sets of challenges: (1) Make Indian economy more vulnerable (2) The impact on global economy can have serious repercussions (3) Can destabilise Indian economy because of increasing volatility in FDI (4) This can lead to negative impact on macroeconomic indicators (5) Can lead to imported inflation
Policies of Indian Government: (1) Masala Bonds - exchanges taking place in domestic currency (2) currency swap agreements (3) liberalised FDI norms for attracting more investments
Close · a summary
Thus India follows a regulated path, ensuring ease of doing Business along with ensuring stability in economic framework.