For the record，at the last summit of the G-20 in Toronto，Canada in June 2010，India opposed the proposal to tax speculative capital flows that have been causing undue volatility in developing countries.

This is consistent with domestic tax policy inIndia，where capital gains earned in the stockmarket go untaxed，as too do dividends earned from equity ownership. India’s posture on a global policy issue of concern in these times of capital volatility，is defensive of its short-term interests and hamstrung by its own recent growth record，which is perhaps highly dependent on short-term capital inflows and fleeting upticks in asset values that create an illusion of durable wealth creation. Without having ever ventured to institute any substantive taxes on speculative capital flows，India’s policy establishment has learnt the hard way that verbal concessions to the need of such a levy，are likely to be severely punished by global investors.^[1]With India’s growth record now seen to be in a precarious state，official spokesmen are likely to be extra cautious in terms of the options they are seen to be considering.

India’s official posture towards the G-20 is，judging by the tone of the commentary offered in the most recent Economic Survey，highly positive. This is a forum that has become more active than before，ramping up its annual gatherings from one to two in 2009 and resolving to do likewise in 2010. The Toronto summit of June will be followed in November by one in Seoul.

The G-20，has according to the Economic Survey for 2009-10，agreed among itself，that it will be “the premier forum for international economic cooperation”.

Intentions aside，it needs to be asked if the G-20 has the internal coherence to provide the clear-sighted leadership the world needs at this time. The deafening political discord that the

U.S.-still the singular fulcrum of the global economy-is experiencing，does not carry the faintest suggestion that it can show the breadth of vision to carry the rest of the world forward in concerted action to remedy collective economic ills.

On December 31，2010，the massive tax concessions introduced by the George Bush administration in 2001 are due to expire. That they were introduced just as the U.S. was entering into international military engagements that called for greater resource mobilisation efforts，showed that the tax cuts were ill-conceived to begin with. A so-called “sunset clause” on the tax cuts was an opportunistic compromise between the opposition Democrats and Bush’s Republican party，since none among them was really sure where the measure-the quintessential triumph of ideology over commonsense-was taking the country.

As PresidentBarack Obama nears his moment of decision on whether to retain the Bush tax cuts or not，he is besieged by the Tea Party movement which has likened the slightest retreat to a form of treason. Obama’s instinct，consistent with the advice of all but the fiscal fantasists，is to do away with the tax cuts for the upper-income groups，i.e.，those earning in excess of a quarter-million dollars a year，and to stimulate the economy by cutting taxes for the lower and middle-income groups.

Prescriptions for the current paralysis of the world economy，devised by well-regarded and socially responsible economists，provide an indication of how deep the policy dilemmas are.Raghuraman G. Rajan of Chicago University-a former chief economist of the IMF-believes that the U.S. would have to cut its deficit by slashing expenditure and if necessary，raising taxes selectively. He also insists that the Chinese and Japanese governments，which hold enormous accummulations of dollar bonds，should revalue their currencies.

These are themes that have been sounded at various times over the last many years，without ever eliciting the cooperative responses required. The reasons are fairly clear. In the mid-1980s，the U.S. economy was about to suffer seizure on account of the value of the dollar，then ruling at record highs，despite chronic and growing trade deficits. The deficits in turn，were a direct consequence of the voodoo economics introduced by the hugely revered Ronald Reagan，who cut taxes，raised defence spending and promised that he would balance the budget at the same time. There was obviously no way that this circle could be squared. But the external account deficits that the U.S. economy then began to run，proved limitlessly expandable，simply because the U.S. dollar was the world reserve currency.

As chief economist of the IMF，Rajan was at the centre of an effort in 2006 to bring the five economies that had the greatest stake in remedying the growing global imabalances to some semblance of concord on the best strategy available. The U.S.，the E.U.，China，Japan and Saudi Arabia were involved in this round of extensive consultations under the aegis of the IMF. The upshot as described by Rajan is worth reproducing