Question

Which of the following measures was announced by the Government of India in the year 1994?

• A. Full convertibility on capital account
• B. Full convertibility on current account
• C. Constitution of the Narasimham Committee on banking sector reforms
• D. Constitution of the Abid Hussain Committee on trade policies

Answer 1

The Correct Option is B

The question asks which measure was announced by the Government of India in 1994. To determine the correct answer, we need to analyze each option based on historical context:

1. Full convertibility on capital account:

   This refers to the ability to freely convert currency for capital transactions. However, India did not announce full convertibility on the capital account in 1994. The capital account convertibility has been a subject of debate, and full convertibility is not yet implemented as of the current policy framework.

2. Full convertibility on current account:

   This measure was indeed announced in 1994 as part of the economic reforms initiated by the Government of India, spearheaded by then Finance Minister Dr. Manmohan Singh. This allowed the Indian Rupee to be freely convertible for current account transactions like trade, travel, education, and other services. Thus, this is the correct answer.

3. Constitution of the Narasimham Committee on banking sector reforms:

   The Narasimham Committee was constituted in 1991 to address banking sector reforms. Therefore, this measure does not pertain to the year 1994, ruling out this option.

4. Constitution of the Abid Hussain Committee on trade policies:

   The Abid Hussain Committee was set up in the early 1990s but was not directly linked to any specific announcement in 1994. Hence, this is not the correct answer.

Based on the above analysis, the correct answer is Full convertibility on current account. This measure played a crucial role in facilitating international trade and encouraging foreign investments by allowing Indian businesses and individuals to transact in foreign currencies without restrictions, thereby integrating the Indian economy with the global market.