CPM asks govt to reject full capital a/c convertibility

New Delhi, Sep 4 (UNI) Communist Party of India (Marxist) today urged the government to adhere to the Common Minimum Programme and reject the Tarapore Committee recommendations for fuller capital account convertibility.

Opposing greater liberalisation of capital inflow and outflow as recommended by the Tarapore Committee, the party polit bureau said dilution of controls would turn Indian economy into a speculative economy and trigger a currency crisis.

''Greater flow of speculative finance capital into the Indian economy will be the result of dilution of capital controls,'' the CPI(M) polit bureau said.

It will also increase the risk of a currency crisis as along with Non-Resident Indians (NRIs), like the foreign institutional investors, resident Indians will also be able to take large amounts of money out of the economy without any restrictions, the party said in a statement.

According to the party, the National Common Minimum Programme is committed to reducing the 'vulnerability of the financial system to the flow of speculative capital'.

The party had earlier opposed Prime Minister Manmohan Singh's statement on the move towards fuller capital account convertibility in March.

Explaining its stance, the party said the nature of capital inflows into the country in the recent past has been a cause of ''serious concern''.

Quoting the Reserve Bank of India report on Foreign Exchange Reserves, it said the ratio of short-term debt to foreign exchange reserve has increased from 4.2 per cent in March 2004 to 7 per cent in March 2006.

Similarly, the ratio of volatile capital flows to reserve increased from 35.2 per cent in March 2004 to 43.2 per cent in March 2006.

''Rather than taking note of such serious developments, the Committee has suggested that the RBI should undertake an in-depth examination of the coverage and accurancy of these data,'' the CPM(M) said.

The RBI data has been challenged by the Committee because it did not conform to its ''premeditated conclusions'', the polit bureau said.

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