Capital Account Convertibility – priority No. 2

The recent roadmap laid by a committee on Capital Account Convertibility, has recommended a three-year time frame for complete convertibility by 1999-2000.

Among the other recommendations, what caught my attention was the proposal that exporters/exchange earners may be allowed 100 percent retention of earnings in Exchange Earners Foreign Currency (EEFC) accounts with complete flexibility in operation of these accounts including cheque writing facility in Phase I.

However in my opinion, at this stage, full CAC promises no large benefits while it increases the risk of things going badly wrong. Variations in the flow of short-term capital, like bank loans, give rise to pro-cyclicality of the capital account, which provides the main mechanism by which free capital flows create problems.

I feel it will not have any major effect on trade as such or help in boosting our economy or for that matter the exim community too.

I believe that other liberalizing reforms – from electricity pricing to pruning the fiscal deficit, to labour law reforms – deserve to be priorities over complete capital account liberalization.

With the main constituents of the current government going against both labour reforms and convertibility, the government can perhaps cave in on convertibility and push for flexible labour laws. It will thus be a win-win situation for all.

Be very prompt and specific while replying to Request for Information (RFI) and give only the relevant product information to the buyer.

National Institute of Design (NID) Ahmedabad, in another of its innovative and enterprising endeavour has tied up with Jharkhand Government to e-market its indigenous products.

It is indeed a great achievement. And to start tradeindia.com when other people were shying away owing to the dotcom slum at that time, speaks a lot about the management. Keep up with the good work and take us along in the path of prosperity.