NEW DELHI: The Communist Party of India (Marxist) on Monday said Prime Minister Manmohan Singh's statement on a movement towards capital account convertibility would be disastrous for the economy.

"It is a major decision and he has announced this outside Parliament when it is in session," Rajya Sabha leader Nilotpal Basu said at a press conference here.

"Could lead to instability"

Countering Dr. Singh's observation that the country could go in for fuller convertibility, as the economy was healthy and Sensex on the rise, he said analysts pointed out that the stock market indices were going up because of foreign institutional investors and `hot money.' Such funds would flow out of the country if there was any change in the tax structure and lead to instability.

Mr. Basu said there was very little investment in greenfield projects, and economic activities were restricted to mergers and acquisitions. Agriculture too was in distress.

Rup Chand Pal said the Government was privatising the Reserve Bank of India "surreptitiously," beginning with cheque clearance operations.

According to the RBI Act, only its Board was authorised to oversee and monitor cheque clearance.

He sought a full discussion on the issue.

Mr. Pal also raised the issue in the Lok Sabha during zero hour and demanded that the move be stopped.

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