The Reserve Bank of India, RBI has been forced to raise by 50 basis points the Cash Reserve Ratio, CRR or the money banks have to keep in reserve or in government bonds. This is in an effort to bring down lending and tame inflation. With food inflation running at over 17% and general inflation at around 8% this may be a stopgap measure before the bank is forced to increase interest rates which will hit economic growth. The government and industrialists are against such a move but the RBI may have no choice. The government wants growth to continue because that increases tax collections which, with the fiscal deficit at over 6%, they need desperately to balance the books. The government is very proud of having averted recession and achieved growth last year when the rest of the world was down. This was achieved by injection of money into the economy by almost doubling the salaries of undeserving kleptocrats, by forgiving bank loans taken by farmers and by doling out cash to farmers in the NREGA scheme. Indirect taxes were reduced to stimulate consumption. The government cannot take back money thrown at kleptocrats and farmers so they are desperate to increase taxes. If they do that it will add to the cost of goods and services and inflation will spike. The RBI will then be forced to increase interest rates. Misusing public funds for winning elections may seem sweet in the short term but may cause serious indigestion later.