i don't quite buy this because i am suspicious of the politicians' motives in going for convertibility. it is not as though there is a great demand for convertibility: FIIs are entering india in droves and FDI is increasing too, as they smell profits in eg. infrastructure and in the billion-person market. and there is clearly enough capital being generated in india. the 29% savings rate is the official savings rate, what about the savings all the underground economy transactions in cash that the government never gets to see? what about all the money politicians make from bribes? where did that mohammedan minister expect to get rs. 51 crores to kill the danish cartoonist other than from locally-generated, 'black' money (unless he has a direct pipeline to pakistanis counterfeiting rupees on a large scale).
so what is the urgency for full convertibility? i suspect there are significant bribes to be made, perhaps from the big investment banks which may see their transactions go up. this is the only reason the 'sacrificing' UPA does things: for personal glory and gain, screwing the country is routine and expected.