I know that I do not know much  about Interest Rates , Monetary policies and high finance et al. Yet I think the CNN-IBN Award winner, the  Best Politician of the Year P.Chidambaram and the RBI Governor YV Reddi have buried their heads in the sand  like ostriches. blinded by over confidence of reported economic growth at over 8.5 percent. But   to my modest  intellect  it appears there is a simple but irrefutable logic. . If my son who is in the US invested $100 dollars in India he will earn an  interest of  7.5 percent while if he invested in the US he will get only 3 percent and may be less with further cut today in the interest rate. His earning in India will be  compounded by rupee appreciation and the interest obtained my  son will be even more. What should I advise him  if he has surplus funds? If he invests in stocks in India despite its current volatality he will be  a gainer  fortified by  rupee appreciation since he can time his exit better.

The rupee appreciated by 11 percent in nine months last year. World over interest rates are ranging only up to 5.5 percent and if Indian interest rates are high foreign fund flow will increase unmanageably. If the RBI wants to keep the exchange rate stable at $ equal to 39.50 to appease the IT lobby then it has to buy dollars in the market abnormally. The Finance Minister speaks  global in Davos and other International Financial capitals  but acts   Local  in concert with the RBI whose single point agenda seems to be  watching  the Inflation Index. 

Actually, to  any  ordinary houswife or grocery hunter  who has first hand experience of shopping , it is incredible that the government should be disingenuously putting out statistics to prove that  inflation has been contained and it  is running below 4 percent.  Actually whether the interest rates are low or high the commonly consumed food articles by those at the bottom of the pyramid are rising in prices beyond affordability. Their wages unlike those of the government servants are not indexed to inflation howeever  off the mark the figure may be.

Since Inflation index is a composite one and the weightage of these food articles is not high this is not reflected at all in its true scale for an ordinary householder.   What is happening is prices of Cars, TV sets, Washing machines, Microwaves and such stuff are stable or coming down.

What the FC and RBI Gov are doing now are detrimental to both Fund flow from foreign sources and Inflation.I am sure PC and RBI will be forced soon to follow the FED. But that may be too little or and too late. This will pave the way to stop the UPA in its track for retaining the Lok Sabha in 2009, whatever may be the poltical issues barring unforeseen calamities hitting individual leaders or the nation itself. . .