Rangarajan cautions on moderating capital flows

Rangarajan said there were some signs of cyclical overheating in India8217;s economy, but the recent rise in the rupee has dampened inflation. 8220;Cyclical overheating in an economy occurs when the existing capacities are being fully utilised and demand pressures are still there. Yes there is, to some extent, cyclical overheating,8221; he said.

Indian economy has grown at an average of 8.6 per cent over the past 4 fiscal years, putting pressure on the country8217;s inadequate infrastructure, and added to inflationary pressures in the economy.

The central bank has raised rates five times since last June and increased banks8217; reserve requirements three times since December to rein in inflation and credit growth. Annual wholesale inflation hit 6.7 per cent in late January, its highest in more than 2 years, and has since moderated to 5.06 per cent in mid-May.

Harping on the UPA government8217;s assertion of inclusive growth, Rangarajan asked NABARD to graduate from mere provider of credit for non-productive purposes to promoter of micro-enterprise for correcting regional imbalances.