India’s real interest rate is among the highest in major Asian economies. And instructively, inflation is not moderate or low, as the RBI defines it, in Asian countries with low interest rates.

Unlike many of those Asian countries India is a real democracy, and before anyone scoffs at politicians asking for lower home loan rates they should understand the context of these demands. Look at the Congress. It has only recently understood that home ownership is not some elitist game played in the parlours of South Delhi and South Mumbai but a countrywide paradigm shift. Yes, of course, the Congress is looking at votes; it is a political party. But this particular search for votes is informed by a mature if much-delayed redefinition of the aam aadmi. The BJP, self-professedly a party that understands the middle class, stopped understanding a lot of things after its 2004 defeat. But its recent national executive called for reducing home loan rates.

No one knows better than political parties what the political costs of inflation are. And in what could be an election year, if the two national parties are asking for lower home loan interest rates, anyone who knows Indian politics should know that the Congress and the BJP have tried to think through the economics of their demand. The question is why the RBI is not thinking through its policy.