How Should RBI (Reserve Bank of India) deal with Forex Inflows ?

Recently RBI intervened in the Forex market to curb ECBs (External Commercial Borrowing).
It announced restriction on ECBs, limiting their use for rupee expenditure. Companies will now be able to raise only up to $20 million abroad for rupee expenditure and only with prior RBI approval which in turn means companies can at best, raise Rs 80 crore abroad via debt for domestic expenditure. For the rest, they will have to look for local financing.
This comes at a time when companies are facing higher interest rates at home and there is a growing demand for external funds to take advantage of the interest rate arbitrage.
The move is aimed at containing the huge inflow of dollars, which puts inflationary pressures on the economy. RBI has to release the equivalent of rupees to absorb the dollar inflow, so as to neutralise its effect on the money market which leads to an increased money supply in the economy, adding to inflation.
This move would also prevent the Rupee appreciation and excessive money dumping in the economy; however this move would shoot up the borrowing rate.

There is large inflow of foreign funds happening today due to the interest rate arbitrage which is primarily governed by high output growth and weaker dollar which has built up the confidence of the investors towards future expectations and potential appreciation of present investment.

India is facing tremendous pressure due to the enormous foreign inflows and thereby needs to increase its absorption capacity to stay firm on the growth path and prevent any digression from its mission of 9% growth in GDP, without which it would become a flaccid economy incapable of endurance.
We need to accelerate our process of rewarding infrastructure tenders, open sectors in retail, education and any/ all other sector where there are lesser players. This would open up the economy and provide optimal USE to the SOURCE of funds.