Rupee Convertibility and Exit Policy

The successful of partial convertibility of rupee and adequate foreign reserves have boosted confidence of the government. It is more than likely that we are going to see a convertible rupee on trade account before the end of this year. In official quarters it is believed that fiscal imbalance is only stumbling block in the path of a fully convertible rupee. Other important issue which is as important as fiscal imbalance is an exit policy. An exit policy for existing enterprises or just only for new enterprises is essential to keep a stable exchange rate. Otherwise, we are going to see a sliding rupee against trade weighted basket of currencies as we had in eighties.