There are many ways of preparing a balance sheet. A clever auditor will tell you, if you are a good client, how he can disguise a dismal accounting reality as an attractive investment prospect. The collapsed energy conglomerate, Enron, and its now deceased auditors, Arthur Andersen, are recent examples. What is true of accounting is equally true of diplomacy and statecraft.

As the Bush administration goes into the sunset, it is logical to seek a scrutiny of the balance sheet of Indo-US relations, especially in the outgoing president’s second term, when the world sat up and took note of a bilateral relationship that became important enough for the United Progressive Alliance government to stake its very existence on last year. Such a scrutiny has, indeed, become imperative because events since the November 26 terrorist attacks in Mumbai have exposed the myth of a strategic or natural alliance between India and the United States of America much like the Enron scam.

For this columnist, who has just returned from India to the ground realities of American strategic thinking, it is sad to see a government on Raisina Hill offering to go to Washington and to other world capitals, hat in hand, with “evidence” of terrorist designs on India from across the border with Pakistan.

If P.V. Narasimha Rao had been alive today, he would have told Manmohan Singh and Pranab Mukherjee that India’s fight against terror cannot be won by appealing to the goodwill of rulers in other countries — as the Union home minister, P. Chidambaram, will do in Washington later this week — but only by putting in place a bold agenda for dealing with the cross-border threat and implementing it with cold and steely calculation.

Rao would have been speaking from experience. In 1993, shortly after the serial bombing of Mumbai, his government managed to obtain irrefutable physical evidence of a Pakistani plot to blow up Mumbai. It can now be told that the Research and Analysis Wing, India’s external spy agency, obtained the evidence after Pakistan’s then president, Ghulam Ishaq Khan, presented that proof in Pakistan’s supreme court during Khan’s epic battle against the prime minister, Nawaz Sharif, whom the president dismissed in April 1993, a month after the Mumbai bombings.

Sharif challenged his dismissal under Pakistan’s controversial eighth constitutional amendment. Khan knew that his future as president was doomed if Sharif won the case in the supreme court. He urged the court to hold part of its proceedings in camera and then presented evidence at the secret session that Sharif, as prime minister, not only knew about the Inter Services Intelligence plot to bomb Mumbai using Dawood Ibrahim’s underworld network, but had also given his go-ahead to it.

Lawyers for the State argued at this in camera sitting of the court that Sharif was unfit to be prime minister because he nearly took Pakistan to war with India by allowing the risky serial bombing of India’s premier metropolis. The supreme court quashed Sharif’s dismissal, reinstated him in office and cancelled Khan’s orders for fresh elections. Eventually, of course, both the squabbling politicians were persuaded by the army to resign and fresh elections brought in Benazir Bhutto as prime minister.

Barring India, few countries then realized that Pakistan was already on its way to being the epicentre of global terrorism. Other States were yet to experience the consequences of a process of nurturing terror that General Zia-ul-Haq had started. Besides, terrorism in Pakistan was still State-controlled; it was aimed at bleeding India, and the ISI was then in total control of such State-sponsored acts of terror.

When Rao received irrefutable proof of Pakistan’s involvement in the Mumbai bombings, he insisted that the information must be severely restricted within his government. But in his inner circle, there was an extended and vigorous debate about what to do with the spectacular intelligence coup by RAW.

Like now, many of Rao’s aides then argued that the proof which India had obtained from across the border should be shared with Washington. The Americans knew about the Indian intelligence coup and were obviously keen to lay their hands on it. A senior diplomat at the US embassy in New Delhi, who later reached the top of the American intelligence establishment, had unusually close and extensive personal equations in the New Delhi establishment. He was assigned by the Clinton administration to pursue this objective.

But Rao was firm that, to start with, sharing the evidence could compromise India’s sources in Pakistan and put at risk its human intelligence network in that country, which was much larger in 1993 than it is today. Secondly, he argued that if the Americans wanted to do something for India, they did not need proof of the kind that was in Rao’s possession — or of any kind — in order to act. No one had an answer to Rao’s contention that the US had its own sources inside Pakistan and that if the will to act against Islamabad was found wanting in Washington, no amount of proof would change that anyway.

Unlike Rao, Manmohan Singh does not appear to realize that there is no court of law in diplomacy where proof is required to administer punishment. The idea of mandatory sentencing, which is an integral part of the US judicial system, is entirely alien to diplomacy, not only in America, but all over the world also and it has been that way throughout history.

The Bush administration was in bed with Pervez Musharraf from the end of 2001 till the general went out of office, his final phase in public life being the position of a civilian president. The incoming administration of Barack Obama will soon realize — if its key personnel do not know already — that it needs Pakistan more than India as the US attempts to make Afghanistan its primary battleground against global terrorism by increasing the presence of American troops in that country and making the fight against al Qaida and the Taliban more focussed.

As he travels to Washington, it is important for Chidambaram to reflect on the reality of the fight against terrorism in South Asia — that Pakistan’s Swat valley has already fallen into Taliban hands although no one wants to acknowledge this fall. From January 15, all girls in Swat will stop attending school. Elsewhere, in Afghanistan, the Taliban’s militia are moving northwards and, if unchecked, they will soon start knocking on the doors of Kabul.

Where does that leave Obama? He needs Pakistan more than ever to prevent Afghanistan from reverting to the Islamic militia headed by the one-eyed Mullah Omar. If the Americans were to act on India’s evidence against Pakistan and put Islamabad on a tight leash, they would have to turn to Tajikistan as an alternative supply route for US forces in Afghanistan and as a way to ferry the additional troops and equipment that Obama wants to send out in the fight against al Qaida and the Taliban. But that would require toning down US criticism of Russia’s Vladimir Putin and seeking an accommodation with the Kremlin. That would be unacceptable to many people in Washington.

If the Americans had not burnt their boats with Turkmenistan, they could have relied on the regime in Ashgabat to help. The US has another choice. It could turn to Islam Karimov in Tashkent for help, but that would mean turning a blind eye to incidents such as the shooting of innocent protesters in Andijon in 2005 and giving in to impossible demands by Uzbekistan. The Democrats in the White House and on Capitol Hill will have no stomach for that.

Pakistan realizes that US pressure on Islamabad for its role in Mumbai on November 26 has run its course. Obama may take some cosmetic action to appease India, but no more. The balance sheet of the Bush administration’s promise to make India a superpower is that Manmohan Singh is now back to the very square in which Narasimha Rao found himself in 1993. The incoming US president may continue the tradition of celebrating Diwali in the White House, but when it comes to alliances that matter, Pakistan will count first, more than India.