Shadow of the Emergency.

The Congress still retains its power over public institutions. Yesterday the RBI succumbed to pressure and lowered interest rates by 50 basis points on the mealy-mouthed excuse of stimulating growth. Over the last 3 years the RBI raised rates 13 times to control runaway inflation, so has it succeeded. Wholesale Price Index was fractionally down to 6.89% in March against 6.95% in February but still much higher than RBI target of 5%. However, Consumer Price Index, which actually affects people, was 9.47% in March as against 8.83% in February, milk products rising by 15.22%, eggs, fish and meat by 10.06% and vegetables by 9.55%. One reason for the inflation, sited by the RBI, is wage inflation among unskilled rural workers. This is due to the MNREGA scheme, started by the Congress in 2008 to win the general elections of 2009, in which rural people are paid for 100 days of every year for doing nothing. The payment started at Rs 100/day but has risen to Rs 162/day because it is linked to inflation. Thus rural wages went up by just under 20% between April 2011 and February 2012 resulting in rising food prices. Salaries of useless civil servants are also linked to inflation and Dearness Allowance has already been raised by 7% to 75% of basic salary. Since this is completely non productive spending the only way for the government to meet its obligations is to borrow from the market. The RBI will be selling bonds worth Rs 160 billion on Friday out of Rs 500 billion over the next 3 weeks. ET, March 18. Already bond yields have risen to 8.38%. Since the government always runs a deficit, at some point interest payment on debt will surely be more than tax receipts. What happens then? It is not fantasy. It happened to Iceland, Ireland and Greece so it could easily happen here especially if the Congress stays in power for much longer. However, the RBI is not the only institution to cave in. The Supreme Court, in its wisdom, has ruled that private schools which receive no aid from the government will nevertheless have to reserve 25% of seats for children of poor people from surrounding areas. There is no limit on how many children any couple can produce. The government will pay Rs 6000-18000 per child per year depending on the area. Schools will naturally make up the shortfall in revenue by increasing fees for other children who are being penalised because government school teachers are completely useless and do not come to work even though they receive 3 times the salaries of teachers in private schools. Even the poor prefer to send their children to private schools. Like any police state politicians in India hate the middle class. Instead of increasing the standard of living they seek to bring everyone down to the level of the illiterate, naked aam aadmi. That is the only way they can remain khas.