Increasing debt leads to bankruptcy.

The Purchasing Managers Index has dropped from 53.6 in May to 51.7 in June. Anything above 50 is positive so it is still showing some growth but with retail inflation continuing unchecked how long before it turns negative as well. With the crisis in Egypt set to continue for the unforeseeable future Brent crude has already jumped to $106 a barrel so further rises in petrol and diesel prices are inevitable, which will only make inflation worse. That, in turn, will weaken the rupee raising prices of imported goods, such as oil and coal, making inflation even worse. So what is the answer of the Congress to the impending vicious cycle? It has asked public sector banks to lower interest rates which the banks cannot do without lowering deposit rates as well thus hitting savers, many of whom are pensioners dependent on their savings. The Congress has also imposed the Food Security Bill through an illegal ordinance which will add another Rs 2 trillion to the deficit, raising it to above 5% again. This was done to win the general elections in 2014. The only way to find the extra money is by borrowing more from markets which will tighten liquidity and put upward pressure on interest rates. So on the one hand they are ordering banks to lower rates while forcing them to raise rates by borrowing more. But it is not just internal debt that is getting out of hand. Our external debt has jumped 13% from $345 billion in 2011-12 to $390 billion in 2012-13 so that the ratio of our foreign exchange reserves to external debt has fallen from 85% to 75%. ET, 3 July. According to the RBI yesterday our foreign exchange reserves have fallen by another $3.20 billion to $284.65 billion. This is because the RBI is selling dollars to smoothen the fall of the rupee. Overall our external debt has risen 300% from $112.4 billion in 2004, when the Congress seized power, to $390 billion today. Even more scary is the fact that the short term foreign debt is now $97 billion which is 33.1% of Forex reserves, up from 3.9% in 2004 and 17.2% in 2009. This rises to $172 billion if all External Commercial Borrowings, which is money borrowed by companies, are taken into account. This is 60% of our foreign currency reserves and will need to be paid back in the next 12 months. What that will do to our Current Account Deficit defies imagination. The MNREGA scheme, forgiving all loans to framers, increasing civil service salaries by 80%, Backward Regions Grants and now the Food Security Bill, the Congress has been wasting trillions of taxpayer rupees just to win elections with no protest. This is economic terrorism, more dangerous than bombs. Bankruptcy looms.