House should debate capital account convertibility: CPM
The CPM wants a debate in Parliament on the Tarapore Committee recommendations on fuller capital account convertibility before the RBI goes ahead with their implementation.
By TNN |
NEW DELHI: The CPM wants a debate in Parliament on the Tarapore Committee recommendations on fuller capital account convertibility before the RBI goes ahead with their implementation.
Describing further liberalisation of capital accounts as a “risky and adventurist” path to take, the party on Friday said its benefits would only be restricted to a handful of corporates, banks and high net worth individuals.
The CPM politburo has cited the experience of South-east Asia and other developing countries to express its apprehensions about “volatility” in the financial system, making it vulnerable to capital flight and currency meltdown.
“In case of such a catastrophe the entire population would be affected through spiralling inflation and other adverse consequences,” a politburo statement said. Besides a debate in Parliament, the party demanded that recommendations of the Tarapore Committee are put under “rigorous scrutiny” by the Standing Committee on Finance.
It also said such a move would mean overstepping the Common Minimum Programme (CMP), which does not mention moving towards fuller capital account convertibility. The CPM said it was a matter of “serious concern” that the RBI had initiated the implementation of the recommendations of the Committee despite “strong reservations from several quarters”.
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These suggestions include raising the remittance limit for resident Indians from $25,000 to $50,000 per financial year, easing norms for external commercial borrowings by banks and other entities, raising the limit of FII investments in government securities from $2bn to $3bn by March ’07 and raising the ceiling on overseas investment by mutual funds from $2bn to $3bn. The Left parties had opposed full capital account convertibility saying it was a road leading to “currency crisis and inflation”.
Prime Minister Manmohan Singh had in March asked the finance minister and the Reserve Bank of India to prepare a roadmap for moving towards capital account convertibility saying that India’s own position, both externally and internally, had become far more comfortable.
However, the Left refuted Mr Singh’s argument and questioned whether the fundamentals of the Indian economy were strong enough for full rupee convertibility.
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