Capital Account Convertibility (CAC) is already in India, though not fully in place. This article throws light on the economic benefits of CAC of Indian rupee and draws comparisons with other nations.

Let us imagine a world, where no restrictions exist in terms of movement of goods, capital, or people. Truly speaking that they be the best way of effective utilization of resources. Capital can move to any place where it can be efficiently utilized, and generate Returns on Investment. People can go and work wherever their skills are best utilized. Similarly, goods flow to places, where remunerative prices are available. Thus restrictions of any kind among different countries should not be there for effective utilization of resources. If that is the case, the Mexican crisis in 1995, East Asian crisis in 1997 and numerous financial crises should not have taken place at all across the globe. So there is certainly something more than what meets the eye.

For all practical reasons, there exist dynamic disparities among nations due to various reasons. They may be due to business cycles, geographical locations or political setup. Since disparities exist among nations, there is volatility in the movement of goods and capital among countries. Capital flows from a place of low return to a place of high return. With this backdrop in mind, let us understand Capital Account Convertibility (CAC) in greater details.

As the name itself suggests, CAC means our rupee can buy anything to the extent of any amount, anywhere, anytime and in any currency. Foreigners can buy and sell anything in India without any restrictions or questions being asked.

Treasury Management, Capital Account Convertibility, Economic Benefits, Mexican Crisis, Foreign Direct Investment, FDI, Foreign Exchange Reserves, Asian Economies, Economic Crisis, Financial Markets, Account Deficit, Capital Account Liberalization, East Asian Crisis.