In cuckoo land.

About 2 weeks back finance ministry officials were trying to convince S&P Credit Analyst, Takahira Ogawa that India's credit rating should be increased. HT online, April 27. Over 2 hours they cited improved growth prospects, increased revenues and efforts to contain government deficit. Mr Ogawa listened politely giving no sign of what he was thinking and yesterday S&P reduced our credit rating to BBB-, saying that there is a 1 in 3 chance of a downgrade to junk status. What is frightening is, not that S&P did not believe their chatter, but that they actually believed their own fantasy. " We were not expecting this downgrade," said one official. " We made a presentation arguing India's growth prospects, tax-GDP ratio, efforts to fix the fiscal deficit are quite genuine and deserve better ratings than countries like Tunisia," said an official who was present at the meeting. Really? India's growth was fueled by cheap money coming from abroad and not by increasing exports. The sub prime crisis in 2008 in the US coincided with a massive injection of liquidity by the Indian government in the form of writing off of all farmers' loans, reducing excise duties and service tax from 12.5% to 10.5%, increasing civil servant salaries by 80% and starting the MNREGA scheme which doles out money to rural people for 100 days every year. This was done to win general elections in 2009. The result was a spike in inflation, which has not been controlled by 13 rate rises, and ballooning deficit. Increased revenues are not because of increase in production, as shown by Index of Industrial Production which has dropped from 9.7% in 2008 to 3.9% in 2012, but because of extortionate rise in taxes which adds to inflation and reduces consumer purchasing power. The desperation of the government was shown by the General Anti Avoidance Rule in this year's budget which aims to tax trade deals retrospectively going back up to 50 years. This is to get round a Supreme Court verdict which held that Vodafone is not liable for a withholding tax of Rs 110 billion on its purchase of Hutch for $11.1 billion. So what of the World Famous Economist who was supposed to take us to the promised land? Moody's Analytics said, " The single biggest factor weighing on the outlook is the Indian government. In all economies it is impossible to separate the economic from the political outlook and that is particularly the case in India." The report further noted that there is broad-based weakness in the economy as all sectors are vulnerable. The report termed the Prime Minister as an " ageing technocrat who now appears tired of the rough and tumble of Indian politics". It is being suggested that Indonesia should replace India as the "I" in BRICS. Oh dear! All those foreign visits and banquets! What is it they say about lying to all the people all the time?