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Jaswant Singh rules out full convertibility

By Our Special Correspondent

NEW DELHI DEC. 23. The Union Finance Minister, Jaswant Singh, today ruled out full convertibility of the rupee on capital account till the fiscal deficit and inflation were completely under control. He felt there should be no anxieties on the full convertibility issue as long as fiscal conditions remained at "comfort'' levels.

Replying to questions in the Rajya Sabha, he said the Tarapore Committee had already prepared a road map for moving to full convertibility of the rupee. But he pointed out that there were many factors, which had to be taken into account including the state of the fiscal deficit and inflation.

On management of foreign exchange reserves, which have reached $100 billion, he said as a result, India had decided not to seek any assistance from any country. India has already pre-paid $7 billion of high cost external debts and would continue to do so. He said the reserves served the country economically, psychologically and diplomatically.

Pointing to the benefits reaped by corporates, he said foreign exchange for all practical purposes had been made convertible in the country as business houses could borrow foreign exchange for projects abroad. Corporates were now also able to borrow at better rates due to high exchange reserves, he said.

Mr. Singh felt the foreign exchange reserves would continue to rise and the country had not reached a plateau as yet on this score. Asked about warnings that India could face forex management problems, he said the Reserve Bank of India had already taken measures to prevent any difficulties.

Mr. Singh pointed out that foreign exchange reserves were managed and operated by the RBI. The reserves were invested in a multi-currency portfolio consisting of international convertible currencies. Deployment of reserves is guided by the principle of safety, liquidity and return. The RBI closely monitored the developments in the international foreign exchange markets and makes the needed and suitable adjustments in currency composition of reserves.

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