How far is India from capital account convertibility?
Currently there are restrictions on the capital account. There are limits to Indian companies borrowing abroad. There are restrictions on foreigners investing in India. For example, in sectors like telecom and media there are limits on the share the foreign partner can hold. Also, only foreign institutional investors can hold shares in Indian companies, not individuals. There are restrictions on the amount an FII can hold. There are many more restrictions on Indians sending money abroad that does not have to do with importing goods or services. Purchasing a company is allowed but limits exist on the amount that can be sent. Global diversification of household portfolios is almost nonexistent. What will full capital account convertibility do? With full capital account convertibility, there will be no restrictions for foreigners seeking to buy Indian assets. Conversely, there will be no restrictions for Indian households or companies taking rupees out or using foreign exchange for doing
