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Strong financial, private sector must for full convertibility, says IMF paper

The International Monetary Fund today said India must ensure a robust financial and private sector before going in for full convertibility of its currency.

Dr Fleming Larsen, deputy director of the IMF research department, in a presentation of the world outlook said capital convertibility was the right objective for India in the long run, but certain essential preconditions had to be put in place.

He said the benefits of capital account convertibility far outweigh the costs involved as there were risks in integrating with the global financial system.

''If there is inefficient allocation of resources and there are imbalances in the public sector, then these problems have to be dealt with before,'' he observed.

Dr Larsen said India should not act quickly as there were distortions in the economy.

Replying to a question, he clarified that article eight consultations were not related to capital account convertibility and were of a technical nature.

UNI