The RBI has hiked the interest rates once again. This seems to be the only mantra government has for combating inflation, and it is not working. The UPA 1 government had promised a low interest rate regime once and it seems eons ago now. The Government is clueless.
The root causes for the sustained inflation are many. The UPA Chairperson, Sonia Gandhi, has a left of the centre leaning in her policies and is on a social sector spending spree, without any accountability. And the Government, cant or wont, do anything about it. Thus largesse is bestowed on the aam aadmi, with hardly a portion of the intended money reaching the beneficiary.
The pro business Government, headed by Manmohan Singh, has been giving massive tax concessions to the Business Sector over the past 5 years. This has ensured that the Government do not get the benefit accruing from the 8% GDP growth, by way of substantial increase in revenues.
And Government has not taken any step to control its non plan expenditure. Waste is the name of the game with anything to do with Government, the Common Wealth Games scandal is only the tip of the iceberg. The money that should have spent on income generating projects, is lining the coats of the middlemen, who are using it for conspicuous consumption.
Thus, while revenue collection has not shown substantial growth, the expenditure has increased manyfold, resulting in inflation.
Add to this, the role of the black money. It is an open secret that Pakistan has been pumping in fake currencies into the country for a long time now. We have hardly taken any steps to counter this.
Thus there is far too much money chasing too few goods. Is there any wonder inflation is doubte digit?
We are in for a catastrophe if this situation persists.
