Letter to BS: Tariff hikes will not help CAD, but will hurt the economy

This refers to the editorial, “Overprotecting India” (October 1). The hike of import duty on certain goods is bad for the economy as those are part of global trade. The belief that a rise in import duties will reduce the consumption of these goods is misleading because of the high purchasing power of the class that consumes them. The availability of credit from banks and non-banking finance companies will also induce the demand for these goods and effectively, trigger inflation. 

The current account deficit is the net result of the outflow and inflow of capital and to contain or reduce the gap, the country has to make the export sector competitive in terms of quality and price. The manufacturing sector has to drastically improve the efficiency to enable export of these commodities at a competitive price. It has to cater to the needs of domestic consumers and curtail the temptation of using imported goods. The widening CAD should be brought down to ensure sufficient foreign exchange reserves.

VSK Pillai  Kottayam 

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