"I cannot but intuitively feel, that reducing money supply or increasing the cost of money, when food prices are high, is ridiculously stupid. While this increases the odds that such a moronic policy will be implemented, I would like your view on this.

"High food prices in India are more because of bottlenecks in supply with many farmers changing their vocation by selling their land to real estate developers and becoming multi-millionaires or becoming so debt ridden that committing suicide is the only solution. The last few years were a golden opportunity to address these supply issues but politicians were busy dancing to the tune of the SENSEX. The present crisis may force the politicians hand, much like the FX shortage of 1991, forced politicians to open the economy.

"That will send the Indian economy and the SENSEX on a new trajectory."

David Fuller's view I agree that tighter monetary policy and higher interest rates are blunt instruments for dealing with surging commodity prices. It would be far more appropriate to curb commodity price speculation since the actual commodity markets, unlike commodity shares, were never intended to be an asset class for investors and speculators to buy and hold. (See also Eoin's comments below on this subject.)

Regarding politicians, I will paraphrase Winston Churchill: Politicians will always do the right thing…after they have exhausted all the other possibilities.