Desperate yet cowardly.

We have been writing since 2008 that Congress actions to win elections in May 2009 would lead to inflation, high fiscal deficit and a devaluation of the rupee. The MNREGA scheme which pays the rural poor for 100 days a year for doing nothing, increasing salaries of useless civil servants by 80% and forgiving all loans to farmers were acts of economic suicide for the country. Once you increase salaries or start handouts they cannot be reversed and farmers were borrowing large sums of money from banks, which are forced to earmark 40% of lending for " priority sectors ", because they knew that come the next election their loans will be forgiven again. The astonishing thing was that pundits of every description were busy trying to predict how fast the economy would grow and asking the RBI to reduce interest rates to stimulate growth, completely ignoring skyrocketing inflation. Worse, not one person had the honesty or courage to say that there is not enough money in the entire world to give handouts to 800 million people. Most of these fellows are still insisting that the rupee is going to start strengthening against the dollar, that growth will pick up soon and the RBI should reduce interest rates boldly by 100-200 basis points. Well, guess what? In blind panic the RBI suddenly decided to limit what banks can borrow overnight from the RBI to Rs 750 billion. Banks take short term loans from the RBI at 8.25% but now but from now will have to pay 10.25% if the amount exceeds Rs 750 billion. TOI, 16 July. The RBI will also sell government bonds worth Rs 120 billion to suck liquidity out of the market. Normally the RBI buys bonds to inject liquidity in, what is known as, Open Market Operations but is now going to sell bonds after a long time. This is because the bank has already sold billions of dollars to support the rupee and does not have enough in reserves to do so any longer. What the RBI should be doing is raising rates high enough to bring inflation down to around 3% but does not have the guts to do so because elections must be held by May 2014. In fact, the RBI has been timid throughout. Even though inflation was rising in 2008 the RBI was lowering rates. From 9% on 30 July 2008 interest rates were lowered in steps to 4.75% on 21 April 2009, just before the elections. Politicians in India are scum and will do anything to win elections because you cannot loot the exchequer without power and the Congress consists of spineless creepy crawlies who take orders from a foreign woman. The RBI has nothing to gain from elections so should focus solely on the economy. Sadly, it is too cowardly.