RBI governor D Subbarao on Monday said capital controls would become a necessity if

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there is a surge in capital flows.

Capital flows were coming into India on the back of the India growth story and the medium-term task is to improve the economy’s capacity to absorb the inflows, Subbarao said. “Till then, there is a need to calibrate accretion to foreign exchange reserves (in accordance) to the movement in the current account deficit.” The RBI governor was speaking at a discussion as part the RBI’s 75th anniversary.

The accretion to foreign exchange reserves in the last six months was $30 billion. The recent addition to reserves on the back of large capital inflows was manageable, said Rangarajan. When the need arises, there will be capital controls in certain respects and only flows into certain categories will be restricted, he added.