"The Asian crisis is not an argument against capital account liberalisation and the lesson to draw from the crisis is that CAC and reforms of the financial system should move in tandem," Rangarajan said during the convocation address at the International Management Institute (IMI) here.

Referring to cross border capital flows, Rangarajan, also one time governor of Reserve Bank of India (RBI) said, "They has been a source of concern and we need to be aware of how to handle such issues"

"To be forwarned was to be forearmed. However, we should not throw the baby with the bath water," he added.

The former RBI governor said, the process of globalisation carried some risks but each country must prepare itself to meet the new challenges else there was threat of being bypassed by the huge waveof technological and institutional changes.

India's saving rate which grew from 18 per cent in the 70's to an estimated 23.1 in 1997-98 has contributed greately to growth in country but the incremental capital out put ratio (ICAR) had deteriorated over the years due to inefficient use of resources, time and cost overrun, he said.

The ICAR started declining in the 80's and as of now remained at a little below four, he said adding productivity growth was the only key to improve return on investments.