1)India has partial capital account
convertibility. This implies that:
1. Private foreign denominated debt
needs to be met by either private export
earnings or India’s forex reserves.
2. India will have a negative sovereign
credit rating.
answer is 1
need explanation of options…
Full CAC refers to allowing free flow of capital…this means no restrictions to the movement of capital. Option 1 is a clear case of putting restriction which suggests that India doesn’t have full CAC.
OPTION 2 IS A DISTRACTOR…SOVEREIGN RATINGS ARE BSED ON COUNTRYS FUNDAMENTALS AND NOT UPON WHETHER A COUNTRY HAS FULL POR PARTIAL CAC