At last the Reserve Bank of India, RBI got up its courage and increased interest rates by 0.5% yesterday. This increases the Repo rate at which banks borrow from the RBI to 7.25%. The sudden increase in courage may have been caused by panic as the government is scheduled to increase retail petrol and diesel prices after elections in some states are concluded. Again this should have been done weeks ago at the start of the Libyan crisis but was cynically deferred so as not to harm Congress chances in the elections no matter what it does to the finances of the oil companies. Any rise in fuel prices will instantly cause a rise in inflation, especially food prices as fruits, vegetables, milk, fish and meat are all transported by trucks. The other reason for the sudden courage of the RBI may be because there are rumors that Mr Subbarao's tenure as governor may not be extended for another two years as promised before. The government is solely focussed on growth in GDP and a high rate is touted as a badge of honor. However, a growth rate of 9% with inflation at 12% is actually a negative growth of 3%. Much better to have a growth rate of 6% with inflation at 2%. The RBI must bring down inflation to 2% and hold it there by keeping interest rates high. Property prices must be brought down to 30% of present values and not allowed to increase by more than the rate of inflation. This will keep black money out of the economy allowing healthy growth, affordable housing for everyone, low rents and increased savings. One would think that the greatest economist would never allow inflation to be out of control. Trouble is he only thinks of his buttocks. On gaddi.