The Forum of Free Enterprise was a non-political organization founded in 1956 by A.D Shroff and was established to educate public opinion in India on free enterprise and a democratic way of life. The Forum published booklets to further its objects. The following booklet titled, “Convertibility of Rupee on Capital Account” was authored by S.R.K. Rao and is based on a talk delivered by him in Mumbai on September 30th 1997.
The booklet explains the concept of Capital Account Convertibility and elaborates upon its advantages. It is the easy convertibility of local financial assets to foreign financial assets sans governmental controls and regulations and it helps boost the economy by deepening financial markets with foreign investors. It further explains the congenial factors that should exist to aid capital account convertibility like controlled inflation rates, greater fiscal deficits and domestic economic reforms. Capital account convertibility operates successfully in an environment where interest rates are fully deregulated and the cash reserve ratio of banks is kept at the minimum. The text elaborates India’s policies for Convertibility of capital account and its impact on the economy. Its impact on the stock market and foreign exchange rates are also analysed. The text concludes by analysing whether India should move towards more capital account convertibility and gives suggestions in order to formulate an efficient system for the same.