Module: General Practice
Q41: Which expert committee appointed by the Reserve Bank of India laid down the roadmap and preconditions (fiscal deficit, inflation, NPA levels) for moving towards Full Capital Account Convertibility (FCAC)?
✅ Correct Answer: B
The S.S. Tarapore Committee.
The RBI constituted the Committee on Capital Account Convertibility in 1997 (Tarapore I) and again in 2006 (Tarapore II). The committee recommended a "preconditions-based approach" before opening the capital gates fully: Fiscal Consolidation: Gross Fiscal Deficit should be reduced (target < 3.5%). Inflation Control: Mandated inflation target (3-5%). Banking Health: Net NPAs should be reduced to < 5%. India still follows Partial Capital Account Convertibility, meaning while foreigners can easily invest (FDI/FPI), Indian residents face limits (LRS) on taking capital out.
The RBI constituted the Committee on Capital Account Convertibility in 1997 (Tarapore I) and again in 2006 (Tarapore II). The committee recommended a "preconditions-based approach" before opening the capital gates fully: Fiscal Consolidation: Gross Fiscal Deficit should be reduced (target < 3.5%). Inflation Control: Mandated inflation target (3-5%). Banking Health: Net NPAs should be reduced to < 5%. India still follows Partial Capital Account Convertibility, meaning while foreigners can easily invest (FDI/FPI), Indian residents face limits (LRS) on taking capital out.