The Hindu Business Line : Need to clean up procedural hassles for convertibility

The continuation of a knotted up system would militate against the core objectives of fuller capital account convertibility (FCAC), Mr S.S. Tarapore, Chairman of the Committee on Capital Account Convertibility, said.

"There is a pressing need to break out of the control mind-set and substantive issues of capital controls should be separated from procedural knots," he said, addressing a conference on FACC at Administrative Staff College of India (ASCI) here on Monday.

"As we move towards a more liberalised regime, we should not be prisoners of the erstwhile strict control regime," he said.

Mr Tarapore said any liberalising of capital account would come to a naught unless there were concerted efforts to remove the maze of procedural hassles that were endemic of a tightly controlled regime.

Why delay?

Referring to the Task Force set up by the Reserve Bank of India to deal with these procedural hassles, he pointed out that it was supposed to complete its task by December 4.

They took a different stand while dealing with external committees, but when it came to internal committees there was no strict adherence to the timeframes, he criticised.

In his inaugural address, Mr M. Narasimham, former RBI Governor, said capital account convertibility was not risk free. "The benefits have to be set against the downside risks in the form of speculative, disruptive and destabilising flows apart from possibilities of capital flight," he said.

Free movement of capital was seen as a natural corollary of free movement of goods and services in international trade. "The syllogism does not always work that way," he observed.