Capital controls always seen as temporary: Rangarajan

Capital controls have become more respectable since the 2008 financial crisis but must be seen as temporary measures, the chairman of Prime Minister Manmohan Singh's Economic Advisory Council, C. Rangarajan, said on Tuesday.

"...Capital controls have gained some respectability in the context of the recent financial crisis, (but) they are always seen as temporary measures," Rangarajan said in a speech.

"In fact, the best policy option in these circumstances is strong economic growth, which can absorb the larger inflows without affecting stability," he said at a graduation ceremony in Mumbai.

Pressure on the rupee will begin easing with the resumption of capital flows in the first quarter of 2012, he added.

Foreign funds have invested $3.2 billion in Indian equities and $3.3 billion in debt so far this year, according to data from Securities and Exchange Board of India.

The rupee gained more than 7% against the dollar in January after declining nearly 16% in 2011, and hit a more-than-four-month high of 48.60 to the dollar on Monday.