M J K THAVARAJ Fiscal Policies and Inflation: Indian Experience SINCE 'fisc5 is a component of the governmental apparatus, fiscal policy reflects the character and scope of the state. To a large extent, the volume and pattern of incomes and outlays of the government depend upon those who wield state power. Under the early stages of capitalist economic development, governments played the role of an umpire for the ruling elite and that of a policeman protecting the basic frame of the system and its dominant interest groups from antagonistic forces threatening the system from within and without. The philosophy of laissez-faire kept the governments small. Consequently, the best of all public finances was that which was least in amount. Slowly, however, regulatory and welfare functions have been added to the sphere of government so as to temper the excesses arising from the operations of the capitalist system at the national and international levels. Stability of the economic system became a major concern of governments of the developed capitalist countries since the Great Depression. The developing countries on the other hand were anxious to make up for the backlog in their economic development through enlarged state intervention. Extension of adult franchise has also attracted governmental attention to problems of inequalities in income and wealth. The successes scored by the socialist system in the sphere of planned development and