Mother of all ponzi schemes.

Passengers travelling through Delhi airport will now have to pay Rs 462 for domestic and Rs 1068 for international flights making Delhi the most expensive airport in the world. Plans are afoot to tax, not just departing passengers, but arriving and transiting passengers as well. This when private airlines have a collective debt of over Rs 140 billion and are making huge losses putting the future of the entire industry in doubt. The government is also considering raising the price of diesel which would not be a bad thing if taxes are reduced at the same time. Any rise in diesel price will immediately raise inflation which is running at 7% while food inflation is at 10%. Inflation is hated by every country in the world because it reduces buying power and thereby reduces growth. So why are our lot so tolerant of such high inflation. Because about 20% of Indians are rated as middle class which means 240 million people. That is more than the combined populations of France 64 million, Germany 60 billion, Britain 82 million and the Netherlands 17 million. So what constitutes this middle class. There are those in private companies where salaries have been rising at over 10% per year but they would not be more than 20 million. Then there are government employees, politicians, property dealers, shopkeepers and middlemen who generate vast quantities of black money which can only be usefully invested in property. But even if the total of all these people comes to 100 million that still leaves 140 million with a lot of money but no source of income. These are people who have benefited from the 800% rise in property prices in major cities by selling their land and ancestral properties to developers. The Budh International Circuit hosting Formula 1 races in Greater Noida is a vivid example. The developers spent Rs 12-15 billion in acquiring land and building infrastructure. Villagers who sold their land for tens of millions of rupees have suddenly become very wealthy. Beautiful new houses have been built and luxury cars bought. One fellow even chartered a helicopter for his son's wedding. These people are farmers with no other skills and their children are not inclined to waste time in studies, so they are living on their one-off wealth. Since they have no other income their wealth will gradually disappear. Politicians know that and are desperate for property prices to stay high so that more people make money by selling their land. That is why the RBI was forced to reduce interest rates by 50 basis points in spite of high inflation. So, the government is running a gigantic ponzi scheme and like all such schemes it will crash. They are desperate to somehow postpone a meltdown till after the 2014 general elections. This is what our Chief Economic Adviser, Kaushik Basu was hinting at when he said that there will be no reforms before 2014. Standard and Poor's has cut our sovereign credit rating to BBB- which is just above junk status. Should we start to look out for the four horsemen?