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This is with reference to the editorial “Pondering over reforms” (Business Line, December, 4) which mentioned that India is ill-equipped to deal with capital inflows. Albeit this problem is faced by all emerging market economies, I would like to quote the recent remarks of the RBI Governor that simultaneous management of capital inflows, exchange rate appreciation and inflation is “not invincible”.

This shows the determination of the RBI in resolving the problem. Even though there are many tools to efficiently manage capital inflows, the success of any particular tool is uncertain. Successful inflow management tools of one country may not succeed in another. The RBI’s present approach of exercising “partial control” over inflation and exchange rate and its outcome is being widely observed by countries facing similar issues in managing capital inflows.

P. S. Velmurugan Pondicherry

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