By interest rate arbitrage, I mean to say that since interest rates in India are high as compared to that of other countries, every one is pushing money into India. More money chasing few goods further leads to surging purchasing power which takes inflation through the roof.

I spoke about the arbitrage advantage from the view point of foreign investors and not from Indian perspective.

While goin through your articles, i came across conflicting statement. On one hand you are saying that there is interest rate arbitrage cos of higher interest rates in India and on the other hand you are mentioning extremely inflation.
Can you please ellaborate on this and do clarify the interest rate arbitrage thing after takin into accoun the inflation, foreign currency risks and transaction costs. I would realy appreciate a mathemetical analysis of this arbitrage.

Regards
Robin