The economy does not forgive stupidity.

After receiving a drubbing in the state elections earlier this month the Congress has suddenly woken up to the public rage caused by uncontrolled inflation. After insisting for over a year that growth at any cost is more important than inflation our most revered Finance Minister, the man solely responsible for this unnecessary suffering of the people, has admitted that inflation was responsible for the defeats but did not have the guts or decency to apologise. He blamed the states instead. The Wholesale Price Index rose to 7.52% in November from 7% in October and the Consumer Price Index rose to 11.24% in November from 10.17% in October. Food inflation, which affects the poor the most, because physical labor demands more calories, rose to a blistering 19.93% in November from 18.19% in October. Food inflation will moderate a bit as the effect of the fantastic monsoon rains kicks in but, if prices fall a lot, income of farmers will go down causing anger in rural areas. With general elections in 6 months time the FM has few options left. If inflation is left unchecked the Congress faces a rout but trying to bring it under control is fraught with danger. Congress fellows know only one way of winning elections, that is by bribing the ' vote bank ', and any effort to cut expenditure results in enormous anguish. Finance Ministry fellows seek to cut Rs 20 billion from the NREGA scheme, Rs 120 billion from the Rural Roads scheme, Rs 20 billion from the Rural Housing scheme, Rs 32.65 billion from the Watershed scheme and Rs 40 billion from the Livelihood Mission scheme. Already the Rural Development Minister has written an angry letter to the Prime Minister describing the cuts as ' completely unreasonable ', ' savage ' and ' demoralizing '. Another way would be to increase interest rates which we have been saying for at least 2 years. Trouble is that Indian businesses went on a borrowing spree because rates were kept at unreasonably low levels because of the stupid desire for ' growth ', and increasing rates may result in bankruptcies. The Reserve Bank has stopped United Bank from lending any more money because of the amount of bad loans on its books. With growth purely on the back of hot money the danger is that trying to fill in the cracks may result in the whole edifice collapsing. The economy is very unforgiving.