Opinion among a cross-section of industrialists and economists is sharply divided on the question of introduction of full convertibility of the rupee at present.

While the industrialists are generally of the view that full convertibility should be introduced at the earliest and that it will benefit the industry and that it will benefit the industry and the economy, economists responding to PTI pre-budget questionnaire have cautioned that the time is not yet ripe for such a move.

The FICCI president. Mr. Kantikumar Podar said partial convertibility norm of 60:40 resulted in subsidisation of government transactions by those who earned foreign exchange and therefore, amounted to a tax on exports.

Supporting this contention, the ASSOCHAM president, Dr. N M Dhuldhoya said exports would receive a boost on introduction of full convertibility as 100 percent of the foreign exchange earnings will be entitled to market-related exchange rate. This will further stabilise the BPO situation with net exports earning contributing to foreign exchange reserves.

Dr. Malcolm S Adiseshiah Chairman of the Madras Institute of Development Studies is, how ever, of the view that the question of full convertibility of the rupee or raising its convertibility to 75 per cent should not be contemplated for the coming budget.

Dr. Adiseshiah feels it is essential to study the effects of existing reduction in customs duty to give the industry time to adjust itself to further international competition.

The director general of the National Council of Applied Economic Research, Dr. S L Rao has suggested that full convertibility must wait for the decline in inflation to much more moderate levels than they are today and for low inflation rates to continue for a full season.

The export situation would also have to improve considerably as also foreign investment inflow, he said, adding that domestic prices of so-called essential imports were still being administered and controlled by government and some of them were also subsidised.

These, Dr. Rao said, would go up sharply with convertibility so we must wait for convertibility until these issues have been resolved. He added "we could, however like China. raise the present 600 per cent, convertible portion to 70 per cent, subject to at least a portion of existing essential imports being paid for the free market portion rather then 'official portion."

Opposing full convertibility Dr. G Thimmaiah, economic advisor to the government of Karnataka said "the first condition required for promoting exports under full convertibility is reduction in the rate of inflation. This has not yet been achieved though the rate of increase in wholesale price index is showing downward movement.

Dr. Thimmaiah said "Indian industry has not yet achieved cost-efficiency. Further, the interest rate structure is not yet attractive to induce the index of short term funds from abroad. More importantly our exports are not showing up so as to meet the pressure on foreign exchange reserves as result of increased imports."

Prof. J D Agarwal, Director of Indian Institute of Finance, however, disagrees with the opinion of his fellow economists and feels that looking at the foreign exchange reserves position, it is feasible for the government to introduce full convertibility.

Economist turned industrialist, Mr. D N Patodia also supports full convertibility saying partial convertibility has helped export promotion only partially.