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A big leap towards full convertibility of rupee

New Delhi, Jan. 10: Finance minister Jaswant Singh today announced a package of measures designed to move the country towards convertibility of the rupee, including a ‘general permission’ for Indian firms to retain the ADR/GDR proceeds abroad and allow remittance up to $ 1 million from proceeds of sales of assets here.

Singh, who made the announcement at a conclave of non-resident Indians (NRIs), also said Indian firms, mutuals and individuals will be allowed to invest in foreign listed firms with certain riders.

They can invest in listed firms that have “at least 10 per cent shareholding in a company listed on a recognised stock exchange in India as on January 1, of the year of investment”.

Mutual funds will be allowed to invest up to $ 1 billion, a limit that has been raised from an earlier ceiling of $ 500 million. Indian companies can invest up to 25 per cent of their net worth.

The finance minister made it clear that the steps outlined by him today “were just the beginning” and more measures on capital convertibility “were likely to be taken” in the near future. India has been chary of announcing full convertibility of the rupee fearing a flight of capital out of the country and a repetition of the East Asian crisis here. But over the years, it has been taking a number of steps aimed at gradually introducing full convertibility — something which will allow Indians to trade or do business in any currency of their choice.

Singh also said, “The government would within a month’s time take decisions on privatising airports and opening up Indian skies to foreign airlines.” The Cabinet has been debating this move for several months now and a decision is still awaited, but the finance minister implicitly indicated that hitches on this count have been settled.

He also announced the removal of a cap of $ 20,000 for remittance under the Employees Stock Exchange Option Programme scheme as well as on trade-related loans and advances for Export Earners Foreign Currency (EEFC) account holders.

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