With reference to Capital Account Convertibility (CAC), consider the following statements:
1. CAC allows free movement of capital for investments and financial transactions across borders.
2. Under CAC, the government imposes strict controls on foreign investments to maintain economic stability.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Question

With reference to Capital Account Convertibility (CAC), consider the following statements:
1. CAC allows free movement of capital for investments and financial transactions across borders.
2. Under CAC, the government imposes strict controls on foreign investments to maintain economic stability.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

ONLiNE UPSC · Accepted Answer

Statement 1 is correct : Capital Account Convertibility allows the free flow of capital, such as investments and loans, between countries.

Statement 2 is not correct : While CAC promotes free capital movement, it does not necessarily mean governments will impose strict controls. In practice, governments may regulate capital flows to manage economic stability but CAC itself does not impose strict controls.

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M Question 1	⏱ 0
With reference to Capital Account Convertibility (CAC), consider the following statements: 1. CAC allows free movement of capital for investments and financial transactions across borders. 2. Under CAC, the government imposes strict controls on foreign investments to maintain economic stability. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2