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

The widening CAD should be brought down to ensure sufficient foreign exchange reserves

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