The Tarapore Committee was associated with Option 2: Fuller capital account convertibility.

The Tarapore Committee, officially known as the Committee on Capital Account Convertibility, was formed in 1997 by the Reserve Bank of India (RBI). The primary objective of the committee was to provide a roadmap and recommendations for achieving fuller capital account convertibility in India.

Capital account convertibility refers to the freedom to convert local financial assets into foreign financial assets and vice versa. It allows for the unrestricted movement of capital in and out of a country. Fuller capital account convertibility means the complete liberalization of capital flows, removing most, if not all, restrictions and controls on cross-border capital movements.

The Tarapore Committee was tasked with assessing India`s readiness for capital account convertibility and providing a timeline and framework for its implementation. The committee submitted its report in 1997, and subsequently, its recommendations formed the basis for the gradual liberalization of India`s capital account.

The committee proposed a phased approach to capital account convertibility, with specific conditions and prerequisites for each phase. It emphasized the importance of maintaining macroeconomic stability, strengthening the financial sector, and developing appropriate institutional frameworks to manage the risks associated with capital flows.

The Tarapore Committee`s recommendations highlighted the need for a flexible exchange rate regime, sound fiscal policies, robust financial markets, and effective supervision and regulation of the banking sector. The committee also emphasized the importance of prudential norms and risk management practices to mitigate potential vulnerabilities arising from capital account convertibility.

It is important to note that the other options mentioned in the question are not directly associated with the Tarapore Committee. Special Economic Zones (Option 1) are designated areas with specific economic regulations and incentives to promote industrialization and foreign investment. Foreign exchange reserves (Option 3) refer to a country`s holdings of foreign currencies and other assets, which are typically managed by the central bank. The effect of oil prices on the Indian economy (Option 4) relates to the impact of changes in global oil prices on India`s balance of payments, inflation, and fiscal situation.

In summary, the Tarapore Committee was specifically formed to provide recommendations and a roadmap for achieving fuller capital account convertibility in India. Its report and recommendations formed the basis for the gradual liberalization of India`s capital account, outlining the necessary conditions and prerequisites for each phase of the process.