The old stuck record.

It was not a question of if, but when. Our Finance Minister could not resist any longer. He has called for lower interest rates just as his predecessor did regularly. " Real estate has been an important sector for growth," he confessed. True. But for what? The phenomenal rise in real estate prices in India has been because of an explosion of black money. If there are $460 million stashed abroad in tax havens then there are an estimated $1.4 trillion in black money hiding in real estate. Properties in the most expensive suburb in the US are selling for $1,100 per sq foot whereas a house on 800 sq yards of land in an extremely congested area of Delhi went for Rs 850 million in 2013, which works out at around $1500 a sq foot. According to a report from Credit Suisse India has 31.4 million middle class families with wealth between $10,000 to $100,000. According to NCAER India will have 53.3 million families with annual income between Rs 340,000 and Rs 1.7 million by 2016. How can anyone afford to buy any property with that kind of income? Builders regularly cheat customers by taking money before beginning a project and then delay construction with the connivance of banks. With politicians and civil servants needing to hide their illicit loot real estate attracts real villains. The reason why our inflation rate has fallen is because of a high base effect and also because the rupee has remained steady around 60 to the dollar. The dollar has been strengthening against almost every other currency in the world, which has led to a fall in commodity prices, especially oil. While Europe is trying to avoid recession growth rate in China is also falling, thus reducing the demand for commodities. Countries are deliberately weakening their currencies to stave off deflation while our retail inflation is still at 6.75%. There is no evidence that a low interest rate will encourage business fellows to borrow more to invest in India. Interest rates have been at zero in the UK, US, Japan and Europe but that has only seen a rise in stock market values and real estate prices but little in way of new investment. Rates are not predicted to go up in the medium term as inflation is forecast to remain muted. Anyway, interest payment of companies in India is only 2-3% of top line which is insignificant. Lower interest rates will punish savers while rewarding irresponsible borrowers. Savings rate will drop as people will again look to gold to protect their money. The Finance Minister should concentrate on lowering taxes, so that demand goes up, and bringing down real estate prices to wipe out black money. Otherwise the rupee will plummet to a more realistic value. That could be really traumatic.