Full float only when regulatory system is in place

The government today made it clear that full float of rupee would be allowed only after putting in place a regulatory mechanism to ensure financial stability and creating congenial atmosphere like containing revenue and fiscal deficits.

"We are gradually moving towards full capital account convertibilty, but first we have to create conditions congenial for that," P K Bansal, minister of state for finance, said at an Assocham seminar here.

Fiscal deficit and revenue deficit are matters of concern. "We are optimistic of getting fiscal deficit down to 3% and revenue deficit down to 0 by 2008-09," Bansal said.

With the implementation of Fiscal Responsibility and Budgetary Management Act, both the centre and state governments are serious about fiscal consolidation.

India is a strong economy, that is the condition which has to be created before moving to full CAC, which has to be gradual, he said. India has permitted limited capital flow into many sectors and talks are on for allowing foreign investment in retail sector, Bansal said.

The government has also liberalised borrowing norms for raising capital from overseas market.  Public expenditure is a matter of concern but with implementation of outcome budget, the ministeries have been made more accountable, Bansal said.