Lady Godiva economy.

The government has decided to use the tried and tested strategy which is that a lie repeated many times becomes the truth. Hence a succession of shifty mouthpieces declaring that the economy is doing just fine and a growth rate of 11% with inflation at 10% is better than growth at 6% with inflation at 5%. Unfortunately for them figures have a habit of exposing the lies. Foreign Direct Investment has fallen by 78% in June from a year earlier. It was $5.65 billion in 2011 and is down to $1.24 billion. Apparently foreign investors are spooked by poor growth, inflation and changing tax laws. Tax laws keep changing because the government is virtually bankrupt and is unable to control deficit brought about by its profligacy in winning the last elections. Thus retroactive taxes on foreign companies has choked off FDI. Huge taxes on air travel has seen a fall of 10% in domestic air travel. Airlines are making losses and may go bankrupt as Kingfisher has done. High taxes add to inflation and have resulted in fall in household savings. Savings declined from 12.2% of GDP in 2010 to 7.8% this year. This shows the stress on families and means that spending power is falling reducing consumption and profits of all companies making consumer goods. High inflation means that the buying power of rupee is declining so people are buying gold to hedge against devaluation. Gold is selling at its highest level at Rs 31,115 per 10 grams but people are still buying showing what little faith they have in the World Famous Economist. Petrol is already at Rs 70 per liter but may go up by another Rs 3 per liter. The price in the US is around Rs 50 per liter which includes tax at 14%. Thus around Rs 30 is tax on every liter of petrol. Most people rely on their own vehicles to travel to work and will sacrifice spending on other things to pay for the rise in travel cost. The RBI is desperately urging the government to reduce expenditure especially since the poor monsoon is expected to raise food prices adding further to inflationary pressure. But the government cannot. Once you have added 700,000 government teachers, who do not come to work, increased salary of useless civil servants by 80% and have a vast army of rural poor who are getting paid for doing nothing you cannot take it back. Add to this the fact that the next elections are in 2014 and the Congress, led by Ms Sonia Gandhi, is desperate to continue the Nehru-Gandhi dynasty at any cost, and the situation looks dire indeed. They have just one more budget next year to bribe their " vote bank " which means another round of massive waste of taxpayer money, further rise in deficit, uncontrollable inflation and economic collapse. Instead of a king India has an empress. Sadly she equally bare.