Q. Full capital account convertibility will imply which of the following?

1. External Commercial borrowings (ECBs) are not limited by the government.
2. There is no limit to export and import of capital goods.
3. Restrictions of foreign institutional investment (FII) are removed completely.

Select the correct answer from the codes given below:
Answer: Only 1 and 3
Notes: Import and export would be covered under the current account convertibility. ECBs and foreign investment comes under capital account convertibility. Capital Account records all international transactions of assets. An asset is any one of the forms in which wealth can be held, for example: money, stocks, bonds, Government debt, etc. Surplus in capital account arises when capital inflows are greater than capital outflows, whereas deficit in capital account arises when capital inflows are lesser than capital outflows.

This question is part of UPSC Daily 20 MCQ Series Course on GKToday Android app.