Letters: Inflation: deep impact

A V Rajwade has correctly emphasised the critical role that the exchange rate plays in promoting export competitiveness (“Following the wrong lead”, May 9). Since the mandarins of North Block and Mint Road are very intelligent people, one is tempted to wonder whether they are consciously following a totally different road compared to China — a road of current account deficit to be matched by NRI and portfolio investments.

Mr Rajwade has rightly touched on inflation. But he should have also considered its unintended outcome in putting a floor on interest rates, thus curbing investment activity and also justifying a rate of salary increase that is rapidly eroding India’s cost advantage in exporting software and IT-enabled services. The debilitating impact of inflation on fixed-income earners and savers is well known.

P Datta, Kolkata

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