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The article “Rakesh Mohan conducts the Basel Symphony Orchestra,” on the impact of capital flows into emerging markets (Business Line, March 13) merits serious attention. The large inflow of hot money in 2007, in the form of FII portfolio investment, caused extensive damage to India’s export industry, resulting in wide loss of employment.The global recession is not the only reason for the sharp deceleration of our exports. We are also losing markets on price competition, resulting from the devaluation of currencies by neighbours.

Noble Laureate Paul Krugman, in a recent article, termed the US trade deficit and inflow of cheap foreign money as the root cause of the present economic crisis. In the last 30 years, manufacturing industrial sectors have migrated from the US to the developing countries. And today, the world’s largest economy is faced with a soaring unemployment rate. India also is a country with a high trade deficit. Any attempt to balance it with FII inflows will result in irreparable damage to the economy.

K. M. Kunhi, Bangalore

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