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Capital account convertability a must

It is imperative to have capital account convertability as the economy of the country records growth and intergrates with global economy, emphasizes G. Padmanabhan, ED, Reserve Bank of India. While effective capital controls had insulated the country from gettiing impacted by global currency crises, we may have to open up the capital account in future, he added. Keeping any restriction for too long is self-defeating as people end up finding new methods of bypassing that restriction, he said adding the country needs to continue moving towards full capital account convertibility. Padmanabhan was addressing students of a management institute in Mangalore. India cannot afford to remain isolated for a very long time as it will become a truly globalized economy soon and the pace of opening up capital accounts further would depend on fiscal consolidation, inflation control, low level of non-performing assets, low and sustainable current account deficit, strengthening of financial markets and prudential supervision of financial institutions, he said.

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