Financial Developments in India: Should India Introduce Capital Account Convertibility?(Report‪)‬

Abstract The objective of this paper is to examine whether India has reached a stage of financial development when full capital account convertibility could be introduced. The issue is important because in the aftermath of the Asian and other developing countries crises, there has been some rethink and recognition that financial deregulation can't run ahead of prudence. We answer the question posed above within the framework provided by McKinnon on financial repression and thereafter use the relevant financial development indicators developed by Goldsmith to assess whether India has reached a stage of financial development when full convertibility of rupee could be introduced. The study concludes that India has not yet reached a stage where full capital account convertibility could be possible.