Question

Question No. 26
Which of the following is not a benefit of convertibility ?
Convertibility of the rupee will stabilize its exchange value against major currencies of the world
Vt will attract more foreign capital inflow in India
Vt will help promote exports
It will discourage imports to India​

Answer 1

Yes

because it is forgien

Answer 2

Answer:

It will discourage imports to India​ is not a benefit of convertibility.

Explanation:

Convertibility exists as the ease with which a country's currency can be transformed into gold or another currency via global exchanges. India's rupee stands as a partially convertible currency—rupees can be exchanged at market rates in certain cases, but approval is needed for larger amounts.

Benefit of convertibility

Encouragement of exports:

• An important benefit of currency convertibility exists in that it encourages exports by increasing their profitability. With convertibility profitability of exports gains because the market foreign exchange rate is increased than the previous officially fixed exchange rate.

Encouragement to import substitution:

• Since the free or market-determined exchange rate stands higher than the previous officially fixed exchange rate, imports become additional expensive after the convertibility of a currency. This prevents imports and gives a boost to import substitution.

The incentive to send remittances from abroad:

• Thirdly, rupee convertibility provided greater inducements to send remittances of foreign exchange by Indian workers living abroad and by NRI. further, it creates illegal remittances such as ‘hawala money and smuggling of gold less attractive.

Integration of World Economy:

• Finally, currency convertibility provides a boost to the inte­gration of the world economy. Under currency convertibility there exists easy access to foreign exchange, which greatly benefits the growth of trade and capital flows between the countries.

Hence, It will discourage imports to India​ is not a benefit of convertibility.

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