It is all linked.

The experts tell us that the reason the rupee is falling, although it has gained a few paise recently, is that the Current Account Deficit is too high. CAD is the gap between savings and investment. Livemint, 18 June. It is high because savings have been falling. Gross domestic savings have fallen from 36.8% of GDP in 2007-08 to 30.8% of GDP in 2011-2012, which is a fall of 6%. Financial savings of households is down from 11.6% to 8% of GDP. While savings in the usual financial instruments has fallen sharply India imported $53.4 billion worth of gold in 2011 and $54 billion worth in 2012. This contributed to a trade deficit of $162.2 billion in 2011 and $194.5 billion in 2012 while CAD was $60.8 billion in 2011 and $93.4 billion in 2012. This was the time when gold was zooming to ever higher values reaching $1900 per troy ounce. It is now down to around $1200 per troy ounce. So why were Indians buying gold when it was so expensive while their savings were declining. The reason is that India has the worst Real Policy Rate in BRICS countries as well as comparable Asian countries. The Real Policy Rate is the difference between the rate of Consumer Price Inflation and the interest rate set by the central bank, which is called the Repo rate in India. Our CPI is 9.3% while our interest rate is 7.25% giving a RPR of -2.05%. Brazil has a high CPI at 6.5% but its interest rate is 8% giving it a RPR of +1.5%, meaning that Brazilians get real returns when they save their money in banks. Russia has a CPI of 7.4% and interest rate of 8.25% so the RPR is +0.85%. Only South Africa and Turkey have negative RPR. South Africa has a CPI of 5.9% with an interest rate of 5% giving it a RPR of -0.9% while Turkey has a CPI of 6.5% with interest rate at 4.5% giving it a RPR of -2%. The CPI in Thailand is 2.3%, in Malaysia it is 1.7% and in Philippines it is 2.6%. Is it any wonder that these countries are doing so much better than us? When every country in the world gets anxious about inflation why is our government so unconcerned? Because inflation does not affect the wealthy, the poor, politicians and civil servants. The wealthy because they do not care for a few million here or there and the poor because there are a plethora of social schemes to buy their votes. Politicians do not pay any bills, leaving such mundane things to the taxpayer and civil servants have index linked dearness allowance and pensions. Anyway salaries are just pocket money for children. Their real earnings are from bribes and outright theft. The only people who suffer are the middle class, whom the politicians hate because they ask questions. It is all self interest.