The red flags have gone up on the proposed full convertibility of the rupee.
A day after the recommendations of the Tarapore Committee were released, the Left described the proposals as “an extreme form of financial liberalisation”, and appeared set to oppose their implementation.
Trade unions and Left Front constituent Forward Bloc strongly criticised the move, and the CPI(M) was learnt to be preparing a detailed critical note, to be submitted to the government on Monday.
CPI(M) general secretary Prakash Karat plans to raise the issue at a news conference in Bhopal on Sunday.
A source in the CPI(M) described the attempt to free the rupee as the “most right wing move” of the government so far.
“The common minimum programme made a mention of disinvestments, but it didn’t have a word on capital account convertibility (CAC). The Prime Minister suddenly announced the government’s intention to introduce CAC at a conference in Mumbai in early March.
It now seems the government was only waiting for Parliament’s monsoon session to end to release the report,” the source said.
The Tarapore Committee was set up by the RBI to prepare a roadmap for CAC. Its recommendations include lifting existing capital controls, including a phased increase in the cap on outward remittances by NRIs up to $200,000 over five years, the removal of a host of restrictions on overseas investments and borrowing by Indian mutual funds, banks and corporations.
The Centre of Indian Trade Unions (Citu) said allowing unrestricted freedom to Indian financial institutions and companies to take capital out of the country would pave the way for a currency crisis.
“What’s more objectionable is the effort to bring back certain recommendations of the Narasimhan Committee on the banking sector, especially the one related to bringing down government stake in public sector banks to 33 per cent,” Citu general secretary Chittabrata Majumdar said.