"Surging foreign exchange reserves have provided an opportunity towards further relaxation of existing capital controls," the 2002-03 survey said adding that measured approach towards capital account convertibility needs to be continued.

The rising reserves also provide a greater flexibility to exchange rate management towards developing deeper market for foreign exchange transactions as also an opportunity to expedite completion of the trade liberalisation agenda, the survey presented in Parliament by Finance Minister Jaswant Singh said.

The economic revival of domestic demand was likely to further boost main sources of capital inflows, thus aiding in further reserve accumulation in the short run.

Despite the continuing geo-political tensions in the Middle East, the survey noted that India's external position continues to remain strong with rising level of foreign exchange reserves providing a cushion against any such major shocks.

The current account surplus reflects both strength in goods and service exports and buoyant net transfers, it added.

PTI