While the choice of the exact time of publication (days before the elections) of the Report does seem a little curious, we do not wish to comment on that. Rather, we recognise the fact that the RBI has, of late, been showing a remarkable degree of independence in economic thinking and trying to establish its credentials as the central bank of the nation rather than a department of the government.

On closer scrutiny, however, neither the stock market behavior nor the RBI report can be taken to be an appreciation of the way the economic affairs of the nation are being run. Previous experience has taught us to know better than interpreting a rise in stock market prices as a solution to the major economic problems of the country or even as a sign of economic recovery. The Harshad Mehta bubble formed (and burst) at a time of economic depression. Nobody at the time suggested that the depression was the cause of the stock market boom! By similar reckoning, the fact that this time it has coincided with an upspring of that short run business cycle of the industrial economy should be interpreted as just that - a coincidence. It has certainly not been caused by any general economic recovery. It is difficult to pinpoint exactly what it has been caused by. As financial market wizard George Soros tells us in his recent publication, stock price behavior is one of the most intractable variables that businessmen face. It I am asked to hazard a guess, I would point to the pro-stock-market orientation of almost all the policy decision of the BJP government together with the fact that a high percentage of the BJP's fundraisers is connected, either directly or indirectly, with stock-brooking.

So far as the RBI Report is concerned, what is being hidden in the public discussion is that the same report expresses serious concern about the fiscal deficit of the government. As a percentage of GDP this deficit has reached unprecedented levels. In the current financial year (not covered in the report) the trend, for from weakening, has, in fact, become stronger. The market borrowings of the government in the first quarter of the current fiscal year has exceeded Rs. 50,000 crores! There are clear signals that the government, knowingly or unknowingly, is heading towards a debt trap. It is well known that fiscal deficits of his order not only lead to runaway inflation but that is also detrimental to economic recovery. After all, like any individual the nation as a whole has only limited lending abilities. If the government competes with private producers for access to the loan able funds, this sharply increases the cost of investment for the private producers and ultimately kills off whatever prospect of a true economic recovery there may be.

It is important to ask why the government has had to borrow so recklessly. The reasons, however, are not far its seek. On the one hand, the government is reluctant to tax people who are able to pay. On the other, its expenditure has gone up sharply. While wasteful public expenditure has a long history in this country, the BJP government can claim special "credit" for a quantum jump in the volume of expenditure unrelated to socio-economic development. While fund allocations to social sectors continue to be as low as they were before the BJP came to power, last year's nuclear tests and this year's carefully doctored Kargil were two major factors behind the spurt in other expenditure while the nuclear blasts rendered useless the superiority that we enjoyed over Pakistan in conventional weaponry by drawing Pakistan into the nuclear race. This year's war sacrificed hundreds of precious human lives in order to create an upsurge of militant nationalism so that, riding on its waves, the BJP can return to power.

Wars, however, come with price tags. A part from the loss of lives, the injuries and the hardship to be faced by the families of the dead and the injured in the years to come, there is the clear pecuniary cost. The direct cost of the battles alone is likely to exceed the budgetary allocations for defence. On top of it there will come the cost of overhauling the country's military machine made necessary by the war. Rest assured there is going to be some kind of a Kargil Tax, whatever name may be given to it, if the BJP returns to power. I am aware of Jaswant Sinha's protestations to the contrary but simply do not believe them.

The curious thing is that the same government, almost in the middle of the war, granted concessions to the telecom operators which would cost the public exchanger at least Rs. 10,000 crores in foregone revenue. The government apparently had no resource problem there! Even a reduction in the quantum of the concessions granted would have rendered the Kargil Tax unnecessary.

It is also curious that last year's imposedly impressive record of industrial growth has failed so far to be translated into improved direct and indirect tax collections. The reason must be sought in the government's (deliberate?) go-slow on tax collection efforts on the eve of elections so as not to alienate business and upper income classes.