Jayant Sinha calls for full rupee convertibility

Full capital account convertibility of the rupee is essential if India wants to become a top global economy, Minister of State for Finance Jayant Sinha said on Wednesday.

"There are many policy measures and many things that we have to do over a period of time, if indeed India has to become a leading global economy. We have to make it possible for our capital markets to be broader, deeper and for that to happen, capital account convertibility also becomes important," he told reporters on the sidelines of a conference here on the New Pension System.

"Definitely, we have to play our rightful, responsible role in the global economy, we have to move in that direction," he added. 

Reserve Bank Governor Raghuram Rajan had said on Friday that the rupee might become fully convertible in the next few years.

"My hope is we'll get to full capital account convertibility in a short number of years," Rajan said addressing the convocation of the Gokhale Institute of Politics and Economics in Pune.

India has current account convertibility, but does not permit capital account convertibility for the rupee, which would allow its free conversion for capital transactions. This is to prevent depletion of the country's foreign exchange reserves.

The RBI's policy of capital control was employed by Rajan after he became governor to help India withstand the effects $20 billion being withdrawn by foreign investors in the summer of 2013, provoked by speculation of the US Federal Reserve tapering its monetary stimulus programme.