I left my opinion of the response as a comment on Nilanjana's posting, so I won't repeat myself here. Short summary: it bothers me. Radice's review of the book is generally positive, but he wonders a bit at the subject matter and style of most of the poetry on display. Thayil's response seems, to me, quite intemperate in comparison: he ignores all the positive comments in the review, raises strawmen arguments ("orientalism") that have nothing to do with what Radice was actually saying, issues a non-clarification (prefixed, for good measure, by an "of course") to Radice's observation that Indian modernism predates independence, and accuses him of a "preoccupation" with Bengali writing and being a Bengali "apologist", and suggests that Radice's expertise in translation into English -- which surely requires an excellent command of poetic English -- makes him unsuited to reviewing English-language poetry.
What is it about Indians and criticism by non-Indians? Why are we so quick to accuse them of orientalism, quaint nostalgia, patronisingness, reductionism, and who knows what else? But perhaps I should be happy that there are no explicit accusations of racism or colonialism.