ABSTRACT
The foregoing chapter is a part of a ‘Convertibility Report’ submitted in march 2006 to the Committee appointed by the Reserve Bank of India (RBI) to examine the issue of moving towards fuller convertibility. As discussed earlier, a number of recommendations of the 1997 committee have been implemented, moving India forward in this area. Yet the onset of the Asian currency crisis in 1997 put a brake on the process of capital account convertibility in the emerging market economies. India was able to ward off any currency instability and uncertainty, when some stronger emerging markets reeled under the pressure of foreign exchange turmoil, due to its cautious approach and step-by-step liberalization of the BoP under the philosophy of gradualism. There was a consensus amongst even hard-line reformists toeing the line of a gradual move towards convertibility. India’s BoP situation continued to show substantial improvement and forex reserves remained buoyant in the new Millennium. This called for reviewing the process of capital account convertibility. The Prime Minister, Dr. Manmohan Singh, in a speech at the Reserve Bank of India, in Mumbai, on March 18, 2006 referred to the need to revisit the subject of capital account convertibility.
