Teach Me Some Economics, Please!

I would love to help realize the editor’s call for making our business newspaper accessible to as many people as possible, with simple and clear writing. But, often I don’t get the economics. (Psst! don't tell the editor.)
Economic theories are like god’s commandments. You can’t question them.
But I’m tired of renegotiating my home loan with the bank. It’s some eight years since I took the home loan. And I think they must have increased rates at least 15 times. They never cut benchmark rates. Instead they offer larger discounts to attract new borrowers. Existing customers can avail better discounts through renegotiation, which mostly involves a five-figure fee. I must have availed this five times. Some new guidelines I believe bar banks from offering higher discounts to new customers. So hopefully I will not have to renegotiate my loan rate again. You never know though.
The problem now is the loan rates are only going up. And prices of food and fuel are going up. The learnt tell us that increasing interest rates is the most effective way to stop increase in commodity prices. So when prices go up, the banking regulator prompts an increase in the interest rate of all kinds of loans. But how?
If you can’t afford a product, you can’t afford a loan to fund it too. This will make several buyers not to buy and then sellers will be sitting on a pile of products—they call it inventory—for which there are no buyers. This will force them to reduce prices.
The idea is simple. But it doesn’t seem to be working these days. Over the last 19 months, the Reserve Bank increased interest rates 12 times, yet the inflation rate—or, increase in prices of commodities in one year—is still high, at about 10%. Why?
My sense is that this theory is meant for things like houses, cars and televisions, not for basic and perishable products like food and vegetables. That’s because man can’t do without food, he can put off car and fridge for later.
So when demand for food is higher than supply of food and this pushes up prices, the only way to deal with it is to increase food availability. If you are reducing the demand, that may be through starvation of the poor!
The government should encourage farmers grow more food crops through incentives and cheaper loans. It has made loans costlier.
This has begun to impact production. This has begun to impact sales of cars, houses and garments, which are growing at a slower rate than before. So, food inflation is staying high, while industrial production is slowing.
Now, our government is trying to keep prices down but it wants to ensure overall economic and industrial growth stays intact. So, while increasing interest rates, it also allows companies to borrow more money from overseas at lower rates. This option is however not available for farmers.
So it seems making loans costlier is an extremely ineffective way to fight rising food prices. But then I don’t know much of economics. Many those who do, including our policy makers, apparently believe it is effective and they give a feeling that it’s a tried and tested method.
But I don’t get it. Can somebody help, please?