It is nothing new.

From the constant moaning by Congress politicians supported by business fellows and the freeloading press one would assume that the Reserve Bank is the only impediment to growth by keeping interest rates high at 8%. We are being constantly told that growth will jump to over 10% if only the RBI were to bring down rates because inflation will fall in the future. But is it really true? The Wholesale Price Index rose to 10% between 1991 and 1995 ( it is 7.3% now ). Interest rate was 12% in 1991-92, came down to 10% in 1994-95 and was raised again to 12% in 1995-96. We must remember that the condition of the economy in 1991 was dire. We had only $1.2 billion of foreign exchange reserves, just enough for 3 weeks of imports. The Chandrashekhar government sold 47 tons of gold to the Bank of England and 20 tons to the Union Bank of Switzerland to raise $600 million to survive. So it would seem extremely foolish to raise interest rate to 12% at a time when the economy needed all the stimulus it could get. The State Bank of India was having to pay 14.5% on fixed deposits, which meant that your money doubled every 5 years. Surely it must have caused to the economy to contract severely? Not so. Growth was 5.5% from 1996-2000. Companies were adding to their capacity by raising money through bonds. Triple A rated bonds from Tata Steel was paying 18% per year and infrastructure bonds from SREI with double A rating was paying 21%. There was a 3-6 months waiting time on the delivery of new cars. Cell phone companies charged Rs 16 for outgoing calls and Rs 8 per minute for incoming calls but people were still buying. A flat in South Delhi sold for Rs 6 million in 1995-96 but the price came down to Rs 3 million in 2002 as inflation was controlled and a lot of black money disappeared from the economy. The collapse of the Dot com bubble in 2001 helped to bring down property prices. So who was the Prime Minister from 21 June 1991 to 16 May 1996? It was Mr Narasimha Rao of the Congress who had the guts to do what was necessary to control inflation and opt for a steady growth rate while now we have constant bleating about lowering interest rate and raising growth by a clueless and gutless leader. As western countries brought down interest rates and increased liquidity a lot of money came into our market from 2002 onwards. The rupee strengthened to 39.33 to the dollar in 2007 helping to keep inflation in check and interest rate low. Property prices increased exponentially as did the share market giving rise to a false sense of prosperity because much of this rise was due to black money. Congress fellows were strutting around the world pretending to be business geniuses and giving airy speeches at international forums. Inflation followed, consumption fell and growth came crashing down. Will they change? No. Things can only get worse as they stimulate the economy to win the election of 2014.