Convertibility of rupee implies:
[UPSC Civil Services Exam – 2015 Prelims]
(a) being able to convert rupee notes into gold
(b) allowing the value of rupee to be fixed by market forces
(c) freely permitting the conversion of rupee to other currencies and vice versa
(d) developing an international market for currencies in India
Answer: (c)
Explanation:
- Convertibility of currency means when the currency of a country can be freely converted into the foreign exchange at the market-determined rate of exchange.
- The exchange rate is determined by the demand for and supply of a currency.
- In general, the convertibility of rupee means that those who have a foreign exchange (e.g. US dollars, Pound Sterlings, etc.) can get them converted into rupees and vice-versa at the market-determined rate of exchange.