India is red hot. Seems that $ 19.7 billion flooded into our share market this year raising the Sensex to over 20000 and the rupee to 45 to the dollar. Predictions are that India will grow at over 9.5% this year and the Foreign Institutional Investors are loving the growth story pouring money into Indian equities. Increased growth means people in some industries are going to get large pay hikes and bonuses boosting their spending which is showing the rising sales of cars and consumer durables. So high is the demand that there is a waiting list for popular models of cars because ancillary companies are unable to meet the demand for parts. Increased growth also means increased tax collections helping government spending. It cannot get rosier. Yet, the Commonwealth Games are going to cost Rs. 700 billion- 1 trillion which means all the money raised by the auction of 3G licenses has gone down the drain. That money was supposed to bring the fiscal deficit down from 6% to 4.5%. This means that the government has to borrow more putting upward pressure on interest rates. The strong rupee means lower exports but probably helps in keeping inflation lower by reducing imports costs. Inflation continues at around 11%, food inflation at 16% while property inflation maybe anywhere up to 25%. Controlling inflation requires raising interest rates which the government will not allow because it will slow growth rate and decrease tax collections. Of course, I am no economist and therefore do no understand anything about the economy. The good news is that no one else does either.