Q. “Tarapore committee” recommendations are related to which of the following?

[A] Currency Convertibility

[B] Banking reforms

[C] Industrial Reforms

[D] Agriculture reforms

Answer: A

India’s foreign exchange earning capacity was always poor and hence it had all possible provisions to check the foreign exchange outflow, be it for current purposes or capital purposes (remember the draconian FERA). But the process of economic reforms has changed the situation to unidentifiable levels. 

Current Account: Current account is today fully convertible (operationalized on 19 August, 1994).  

  • It means that the full amount of the foreign exchange required by someone for current purposes will be made available to him at official exchange rate and there could be an un prohibited outflow of foreign exchange (earlier it was partially convertible).  
  • India was obliged to do so as per Article VIII of the IMF which prohibits any exchange restrictions on current international transactions (keep in mind that India was under preconditions of the IMF since 1991). 

Capital Account: After the recommendations of the S.S. Tarapore Committee (1997) on Capital Account Convertibility, India has been moving in the direction of allowing full convertibility in this account, but with required precautions. 

Source: TMH Ramesh Singh