A can of worms.

"India's central bank announced...a host of measures to inject liquidity into the banking system, including bond purchases and dollar/rupee swaps, which analysts and traders said could be a precursor to a rate cut next month. The Reserve Bank of India's (RBI) measures, expected to collectively infuse Rs 1.5 trillion ($17.39 billion) into the banking system," after "The daily average banking system liquidity deficit jumped to Rs 2.39 trillion in the fortnight that ended on Jan 24, as per latest RBI data." Reuters. One big reason for the huge deficit is that, "The RBI has spent $77 billion from its foreign exchange reserves through intervention in the spot market to defend the Indian rupee from falling sharply," MC. When the RBI sells dollars it buys up rupees from the market, creating a shortage. One US dollar buys Rs 86.57 this morning. xe.com. Taking a rate of Rs 86.50 to one dollar, $77 billion converts to Rs 6.66 trillion, which the RBI has sucked out. "Since April 1, 2014, Indian banks have written off loans worth Rs 16.61 trillion, according to data from the RBI in response to a Right to Information (RTI) query." "The data, which extend to September 30, 2024, show that only Rs 2.70 trillion of this amount has been recovered." The Wire. Roughly, about Rs 14 trillion has disappeared into dark pockets from our banking system. "The exodus of Foreign Portfolio Investors (FPI) from the Indian equity markets continues unabated, as they have withdrawn Rs 641.56 billion ($7.44 billion) so far this month, driven by the depreciation of the rupee, a rise in US bond yields and expectations of a tepid earnings season." TOI. If US bond yields rise and the RBI cuts interest rate, it will make US bonds more attractive and encourage more money move to the US. "Pressure on the rupee can intensify as the dollar's strength and Chinese yuan's weakness is likely to persist. Higher relative inflation in India is also contributing to rupee overvaluation in trade-weighted inflation-adjusted real effective exchange rate (REER) terms." "Overall, price stability should remain the focus of monetary policy." "A wait-and-watch approach would be best," wrote Gaurav Kapoor. In other words, do not cut the policy rate. In its December meeting, "The RBI's Monetary Policy Committee.., with a majority of 4:2, decided to keep the repo rate (key lending rate) unchanged at 6.5% for the 11th consecutive meeting. citing concerns over inflation and the uncertain growth outlook." ET. That brings us to the annual Union Budget which will be read out to the Parliament on 1 February by the Finance Minister Nirmala Sitharaman. Every Indian and every business wants an easing of the crushing tax burden that we have to bear. TOI. Everyone will be disappointed because the government is bankrupting itself by dishing out taxpayer cash to win elections. "The central government's direct benefit transfer umbrella currently houses 320 schemes across all ministries." "The handout-related consumption bump is also reflected in the 2024-25 advance estimates for gross value added," wrote Rajrishi Singhal. Which means, "The government has just Rs 800 billion to Rs 1 trillion in Budget 2025 for stimulating the economy, according to Neelkanth Mishra, Chief Economist at Axis Bank." CNBC. Tax and spend has been used by governments on public works, education and healthcare (wikipedia) but loot and throw for winning elections creates a can of worms. RBI and the Budget are too weak. Need to stop the loot.