What is current account convertibility

Current account convertibility refers to the freedom to convert domestic currency into foreign currency and vice-versa at market-determined exchange rates for trade-related purposes. In India, the rupee has been fully convertible on the current account since August 1994. This allows individuals and businesses to freely buy or sell foreign exchange for:

• Import and export of goods and services
• Remittances for travel, education, and medical treatment
• Payment of interest or dividends on investments
• Gifts and sundry remittances

This system facilitates international trade by removing government restrictions on day-to-day transactions.