Assume inflation is around 6 per cent next year (or two full percentage points below this year's); GDP growth will then be around 6.5 per cent against this year's 6 per cent. This order of improvement is nothing to cry home about. However, if inflation halves, GDP growth will be 8 per cent. Low inflation is critical to Mr Sinha's calculations-not merely in getting high real growth, but in making his Budget strategy work.

Of the two key elements in the strategy, the one related to the rate of inflation is the interest paid on small savings. Mr Sinha has depressed administered interest rates by 150 basis points. Whether or not the lowered rates will hold depends on the rate of inflation; this will determine the real rate of interest on savings with post offices and banks.

A related issue is the strength of the rupee which fluctuates with the movement of hard currencies, notably the dollar. The rupee is okay as of now, but should it come under pressure, interest rates in the economy will harden (as was seen last year). Apparently, the term lending institutions and banks have been inspired by the Budget to lower lending (and deposit) interest rates. But they can reverse interest rates at short notice.

Uncertainty tinges the prospective low interest rate regime; this will tend to inhibit aggressive investment. It would have been a different matter if the finance minister had spelt out his policy for keeping inflation low.

Sure enough, business will take advantage of slackening interest rates to pare the cost of borrowings already incurred, thus improving the bottomline. But entrepreneurs may not be over-eager to go in for new investment.

The second key element of the Budget strategy is the withdrawal of tax surcharges and halving of the tax on dividends. This (together with saving in interest payments) should give a fillip to distributable profits and dividend payout. The share markets may then become more receptive to new public offerings.

The finance minister has gone by the reform rule book to put resources in the hands of the private sector. Their deployment is, however, driven by expectations. Will a spate of capital issues come before the markets? What are the brick and mortar areas (reflecting excess demand) that are crying out for expansion? Another imponderable is whether the rapid industrial capacity build-up of the mid-90s has reached the limits of utilisation.

Mr Sinha could have revved up private investment demand by aggressively increasing public investment. But this strategy is not open to him; he cannot let the fiscal deficit rise; nor can he withhold additional resources (at a declining cost) from the private sector and go contrary to the logic of reform. Mr Sinha has pushed for reform, let capitalism get its act together and deliver high growth in due season. He has the Hindu rate of growth (now 5-6 per cent) to fall back upon.