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Home› UPSC CSE› Prelims GS Paper I› 2015 questions› Question 63

UPSC CSE Prelims

Subject: Economy Chapter: External Sector & Foreign Trade

2015 PYQ

Question 63

Convertibility of rupee implies

Choose one answer Abeing able to convert rupee notes into gold Ballowing the value of rupee to be fixed by market forces Cfreely permitting the conversion of rupee to other currencies and vice versa Ddeveloping an international market for currencies in India

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Correct answer: C

Correct Option: C Explanation: Currency convertibility means freedom to exchange the rupee for foreign currencies and vice versa, subject to the country’s current capital-account restrictions. Option-wise Analysis: A: Incorrect - Redeemability of currency notes for gold is not modern currency convertibility. B: Incorrect - A floating exchange rate is a distinct concept; convertibility concerns the ability to exchange currencies. C: Correct - Exchange of rupees into foreign currency and back defines convertibility. D: Incorrect - A domestic currency market is not itself the definition of convertibility. Review Note: India has current-account convertibility with controls on many capital-account transactions; “freely” is a simplified exam definition.

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