Multiple wrongs will never make a right.

The Reserve Bank succumbed to pressure and reduced interest rate by 25 basis points today, bringing the interest rate to 7.25%. So far this year the bank has reduced interest rates by 125 basis points under pressure from politicians, desperate to stimulate some growth in the economy which will increase revenue, help decrease the fiscal deficit, avert a credit rating downgrade and postpone the day of reckoning till after general elections which must be held by May next year. Ministers, including the World Famous Economist, keep promising that the economy will start to grow again in 2-3 years because of the reforms they are undertaking this year. What were they doing since 2004? Why were these reforms not instituted in the last 9 years? The best year would have been 2007 when the Wholesale Price Index was at 4.74%, the rupee was 39.33 to the dollar and oil was at $64.20 per barrel. That was when prices of diesel and cooking gas should have been freed, tax on petrol reduced so that its price was the same as diesel, the RBI should have bought billions of dollars from the market to bring down the rupee to around 45 to the dollar to help exports and increase our foreign exchange reserves, while keeping interest rate high to bring down inflation to under 2% and prevent the enormous property price bubble from forming. The high growth in the economy was due to very low interest rates in the US and Europe which allowed Indian companies to borrow cheaply abroad and Foreign Institutional Investors invested vast amounts into our stock market making the rupee strong which helped to keep the inflation at a falsely low level. Instead the imbeciles, puffed up by their own hubris, talked about how we were going to become bigger than China, argued about the size of the rising middle class in hundreds of millions and strutted around among billionaires at the World Economic Forum at Davos lecturing them about how they should be running their businesses. They thought that taxpayer money was theirs to spend and started hugely expensive social schemes to bribe voters to win elections in 2009. The result was ballooning fiscal and Current Account deficits, double digit inflation and falling growth. Now they are in a blue funk because they cannot control fiscal deficit without controlling expenditure, which is impossible unless they stop those social programs which would mean electoral wipe out. So they have increased prices of gas, electricity, fuel and train fares, increasing inflation, increased taxes on everything cutting purchasing power of consumers and forced RBI to reduce interest rates, thus stealing money from savers to protect borrowers, especially the property market which is bloated with black money. Will it work? No. A series of wrongs cannot make a right. But, as long as the fall comes after the elections they do not care.