| Consider the following statements regarding fuller capital account convertibility. |
| 1. India to go for fuller capital amount convertibility need to reduce fiscal deficit, increase the foreign exchange resource and control inflation. |
| 2. Free financial market is a must to accrue the benefit from capital account convertibility. |
| 3. Full capital account convertibility can stabilise the economy during crisis time. |
| Which of the statement(s) given above is/are correct? |
A) 1 and 2
B) 1 and 3
C) Only 1
D) All of these
Correct Answer: C
Solution :
[c] Statement 2 is wrong, because a country needs regulated financial markets to utilise the benefit of capital account convertibility. Otherwise, free financial market will creat instability. Statement 3 is also wrong, because capital account convertibility is dangerous in crisis time, because the companies can pull away from the economy easily.
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