Convertibility of rupee implies:

The correct answer is C. Convertibility means a currency can be freely exchanged for foreign currencies and back, without special permission or restrictions. The RBI accepted current account convertibility in 1994 under Article VIII of the IMF Articles, and capital account convertibility is still only partial.

• A is wrong. Gold convertibility was a feature of the gold standard. Indian rupee notes have not been redeemable in gold for decades.
• B is wrong. Letting the market determine the rupee's value describes a floating or market-determined exchange rate. Convertibility is a different idea, and a currency can be convertible under a managed float.
• D is wrong. A forex market is a consequence of convertibility, not its meaning. It is an outcome that follows once a currency is freely exchangeable.

Mains link: the 1991 reforms, the Tarapore Committee reports (1997 and 2006) on capital account convertibility, and the trade-offs between monetary autonomy, exchange rate stability and capital flows.

Trap: Aspirants often confuse convertibility with a floating exchange rate. Convertibility is about freedom to exchange, not about how the rate is set.