The deadline for capital account convertibility could be pushed back by another ten years, going by the views of the Reserve Bank of India (RBI).
This is way off the schedule suggested by the Tarapore Committee on fuller capital account convertibility and far beyond the end-December 2008 deadline suggested by the Percy Mistry report to make Mumbai an international financial centre (IFC).
The RBI, in its feedback on the Mumbai IFC report, has suggested a more cautious timetable. The feedback is part of the wider consultation process begun by the finance ministry to develop a plan to make Mumbai an IFC.
While the apex bank agrees with the recommendations of report, it feels that reaching full capital account convertibility would need a far more gradual approach. Carrying them out in as little as a year’s time may be hurrying the country’s pace of reforms.
Among the ministries that have given their suggestions, commerce & industries has agreed to carry out the Percy Mistry Committee report’s recommendations in their totality. The ministry of urban development has also said it is willing to carry out Mumbai’s urban revamp under its omnibus Jawaharlal Nehru National Urban Renewal Mission. However, the revenue department has said it will have to carefully consider the tax related proposals at the time of the Budget.
The views of the various ministries will be compiled within a month, after which the government will carry out further deliberations on the recommendations of the report.
The Tarapore Committee, in its 2006 report, recommended a three-phased approach to making the rupee fully convertible, with the first phase beginning in 2006-07, the second in 2007-09 and the last ending in 2011.
Permitting full capital account convertibility is expected to be one of the main tools in making Mumbai an IFC.
The Percy Mistry Committee report, submitted to the government in April, has recommended other far-reaching financial reforms that include reducing government equity and exiting from all financial institutions by 2015.