India not a 'currency manipulator': Rajan

India needs to build reserves in order to protect against outflows, as it cannot keep running to the IMF for help as a large country, the former Governor of RBI said

Former RBI governor Raghuram Rajan said the US Treasury should not label India as a "currency manipulator", as the country needs to build forex reserves to protect the economy from surge in outflows. Rajan, currently a professor at University of Chicago Booth School of Business, further said India runs a current account deficit, which could get larger on rise in crude oil prices in international market.

He said India needs to build reserves in order to protect against outflows, as it cannot keep running to the IMF for help as a large country and also it is very difficult politically. The comments by Rajan in an interview to CNBC comes days after reports that the US Treasury had said it would be monitoring India's foreign exchange reserves and economic policies.

"We need our own reserves, so reserves should be seen as macroprudential tool. Its only when you are holding exchange rate at the grossly undervalued level and nobody could accuse India of doing that," Rajan said. Bank capitalisation: Replying to queries regarding gover nment's announcement to infuse Rs 2.11 lakh crore, Rajan termed the move as "good news" saying it is important for banks to have capital for lending going forward. "Public sector banking system is a big part of Indian system. It is about 70 per cent. More importantly it allows them to take tough decisions," he said.