Convertiblity

• Convertibility is the ease with which a country's currency can

be converted into gold or another currency in global
exchanges. It indicates the extent to which the regulations
allow inflow and outflow of capital to and from the country.
• Until the early 1990s (pre-reform period), anyone willing to
transact in a foreign currency would need permission from the
Reserve Bank of India (RBI), regardless of the purpose. 
• After liberal economic reforms were introduced in 1991,
exporters and importers were allowed to exchange foreign
currencies.
  
 Current Account Convertibility
• Current account convertibility implies that the Indian rupee can be converted
to any foreign currency at existing market rates for trade.
• It allows easy financial transactions for the export and import of goods and
services. 
• The Indian rupee is partly convertible, which means that although there is a
lot of autonomy to exchange local and foreign currency at market rates,
restrictions remain for higher amounts and these still need govt. approvals.
• Similarly, incoming foreign investments in certain sectors
(like insurance or retail) are capped at a specific percentage and require
regulatory approvals for higher limits.
• Full convertibility would mean the rupee exchange rate would be left to
market factors, without any regulatory intervention. There may be no limit on
inflow or outflow of capital for various purposes (including
investments, remittances or asset purchase/sale). 
 Capital Account Convertibility
• Capital account convertibility allows freedom to convert
local financial assets into foreign financial assets and vice-versa.
• It includes easy and unrestricted flow of capital for all purposes
which may include free movement of
investment,capital, dividend payments, interest payments, foreign
direct investments in domestic projects and businesses, trading of
overseas equities by local citizens and domestic equities by
foreigners, remittances and the sale/purchase of immovable
property globally.
• India does not have capital account convertibility there are ceilings
imposed by the govt. in bringing foreign capital and taking out of
local money.