The RBI wanted to help. Did it?

In yesterday's meeting, the Monetary Policy Committee of the Reserve Bank of India kept interest rate unchanged at 6% and its outlook at neutral. It predicted that economic growth will rise to 7.2% from 6.6% at present, retail inflation will fall to 4.5-4.6% in the second half of this year, before rising to 5.1-5.6% in the first half of the next financial year. General elections must be held by May 2019. It is interesting to speculate the effect this decision will have on the elections. RBI may be forced to act by events abroad. The price of oil may jump if there is any tension in the middle east and the Federal Reserve may be forced to raise US interest rates faster because of falling unemployment. If that happens the rupee will fall against the dollar, increasing cost of imports, leading to inflation. US share prices saw huge falls 3 days back on falling unemployment and rising spending among consumers and businesses. If inflation spikes later this year and the RBI raises rates it may not suit the government. Some people in India are convinced that the Prime Minister will bring elections forward to autumn of this year. When in the autumn? That is the time for major Hindu festivals. The Prime Minister's home state of Gujarat and neighboring Maharashtra come to a virtual halt before Ganesh Chaturthi on 13 September. The east of the country will stop from 15-19 October for Durga Puja and the whole nation celebrates Diwali on 7 November. "RBI acknowledged the fiscal slippage, the rising input costs, firming oil prices, hardening inflationary expectations, the impact of house rent allowances and finally guaranteed minimum support farm prices by the government in the Union budget," wrote A Iyer. However, the RBI did not want to "rock the boat" during the recent market turmoil. To pay for increased spending the budget introduced a Long Term Capital Gains Tax of 10% on gains of more than Rs 100,000. The RBI Governor, Urjit Patel said that there are 5 different taxes on capital already -- corporate tax on companies, dividend distribution tax, tax on dividend income above Rs 1 million, a securities transaction tax and tax on short term capital gains. Corporate tax on companies earning up to Rs 2.5 billion has been reduced to 25% from 30% + 3% education cess, as at present. That was unnecessary wrote Nandy and Sur because average tax paid by businesses in India is 25.6%, while the effective tax rate is only 13.6%. The government wants to increase tax collection to pay for increased spending and keeping fiscal deficit under control, while hoping for increased investment and low retail inflation. Did the RBI help?