Burning dollars won't cool.

"The Reserve Bank of India's (RBI) monetary policy committee (MPC) will meet on November 3 to decide on the contents of a letter to be sent to the government following its failure to keep inflation below the tolerance band of 6% for three consecutive quarters since January 2022." TOI. Mythili Bhusnurmath imagines what excuses the RBI might come up with: "It is always difficult to own up to failure," "But like the US Fed and other central banks, we believed high inflation would be a temporary phenomenon, driven by supply-side factors." "We had then hoped we would be able to tread the fine line between supporting growth and keeping prices under control in the coming months." ET. Why is the RBI so worried about growth when, in August 2022, "A government source...said that India is likely to be the fastest growing economy in the world this year." ET. Then, in September, "India has overtaken the UK to emerge as the fifth-largest economy in the world and is set to become third-largest by 2029, reports said." TOI. "In a separate report, State Bank of India (SBI) said in a note that India had surpassed UK as the fifth-largest economy as early as December 2021." Surely the RBI should have been aware of the blistering growth rate and taken steps to cool the economy from January. We hope that the RBI was not tolerating inflation deliberately to increase government revenue. Since, higher the prices, higher the taxes collected on goods and services (GST). "The gross GST revenue collected in the month of April, 2022 was Rs 1,67,540 crore (Rs 1.675 trillion), which was higher by 18% as compared to Rs 1,42,095 crore (Rs 1.42 trillion) recorded in March 2022." BS. The consumer price index (CPI) rose by a whopping 7.79% in April 2022 compared to 6.95% in March. Trading Economics. CPI inflation was 7.41% in September, so that the GST revenue "collected in September totaled Rs 1.47 lakh crore (Rs 1.47 trillion)". TOI. The US Fed is not so tolerant of high inflation. In September, "The US Federal Reserve raised its benchmark interest rate...by 75 basis points for the third consecutive time to fight record inflation." AA. To a total of 3-3.25%. In March 2020 the Fed slashed its Funds rate by 100 basis points to 0 to 0.25%, till 17 March 2022 when it first raised its rate by 25 basis points. Forbes. The Indian rupee was around 75 to the dollar in February but started creeping up to over 76 to the dollar by April. exchangerates.org. The Fed hiked interest rate by 50 basis points on 5 May, and then by 75 basis points on 16 June, 27 July and 21 September and the rupee fell in tandem against the dollar, reaching a nadir of 83 to the dollar on 19 October. This despite the RBI selling $118 billion dollars to support the rupee. ET. "Analysts say it is unlikely that the government will hold the MPC accountable (for inflation) as the central bank and the government have been working together." TOI. In other words, the RBI was just obeying orders. The cost of importing crude oil jumped 76% to $90.3 billion in the first half of the current financial year, from April to September. HT. A weakening rupee will only add to transport costs, further increasing inflation. The economy is overheating. Don't burn dollars. It will not cool.