Finance Minister Jaswant Singh on Tuesday ruled out full convertibility of the rupee on capital account in the country till the fiscal deficit and inflation are fully reined in.
"As long as fiscal conditions are under constraint in the country and they are brought at a level that comfort us, I think there should be no anxiety regarding it (full convertibility of currency)," Singh said during the Question Hour in Rajya Sabha.
He said: "There are many factors for total convertibility of currency -- the state of fiscal deficit and inflation."
A road map has also been suggested by the Tarapore Committee for moving to full float of the rupee, Singh said.
In reply to a query on the management of the burgeoning foreign exchange reserves which have touched $100 billion, the finance minister said it served the country "economically, psychologically and diplomatically."
The minister said as a result of the healthy foreign exchange reserves India has decided not to seek any assistance from any country.
A total of $7 billion worth of high cost external debts had been pre-paid and "India would continue to pre-pay high cost debts," he said.
Singh said the foreign exchange for all practical purposes has been made convertible in the country as business houses can borrow foreign exchange for projects abroad.
The high exchange reserves have also enabled the corporates to borrow at better rate, he said, adding that he expected the forex reserves to rise further.
"We have not reached a plateau (for forex reserves)," the minister said.
On warnings by an international economist that India could face forex management problems, Singh said the Reserve Bank of India has already taken measures in this direction.
"We have many economists in the country and I am happy that this economist evinced interest (in India)," he said.
The minister said foreign exchange reserves are managed and operated by the RBI and are invested in a multi-currency portfolio consisting of international convertible currencies.
Deployment of reserves is guided by the principle of safety, liquidity and return.
The RBI closely monitors the developments in international foreign exchange markets and makes the needed and suitable adjustments in currency composition of reserves.
In reply to a question, the minister said the precise currency composition of reserves is not disclosed.
To a query on why restrictions had been imposed on borrowings through External Commercial Borrowing route, the finance minister said it was to enable a better offtake from Indian banks which are flushed with money.
The borrowings through the ECB route stood at $2.6 billion during 2002-03, $4.2 billion during 2002-03 and $3.2 billion till September in the current fiscal year, he said.
Singh said as a policy the government has now decided to lend money to the Least Developed Countries.
To a query on the poor health of cooperative banks, Singh said the government proposed to come out with a legislation to tackle this problem.
He attributed the problem to 'triangular control' as the state government, the Centre and the RBI had control in cooperative banks.
