The Hindu Business Line : Now for reforms next phase

As if in response to criticisms of a lacklustre leadership, the Prime Minister, Dr Manmohan Singh, last week set his imprimatur on the next stage of financial reforms to move the economy on a higher growth trajectory. The words he used seemed to endorse the sentiment of the Finance Minister, Mr P. Chidambaram, who had a little while before called for "political space" to manoeuvre legislation on banking reforms now stalled in Parliament; he also admitted that there was little consensus on the reforms in question but promised it would be forged in the coming months. That message was even more significant because it was beamed from Mumbai where the Prime Minister was accompanied by the top policymakers, the architects of past and present financial reforms, who shared a platform at the inauguration of SEBI's new headquarters.

The consensus that the Prime Minister spoke of has to be forged in the smithy of the Cabinet rooms before the policymakers face the more obdurate opposition to such reforms from coalition allies. The past few months saw policy differences surface on a host of key reforms outside the financial sector that could portend cross-purpose actions. In Mumbai it was refreshing to hear both the Planning Commission chief, Dr Montek Singh Ahluwalia, and Mr Chidambaram speak the same language of reform in the financial sector and more. Mr Ahluwalia, for instance, obliquely endorsed the Finance Ministry view that industry does not need sops (read, tax exemptions) but quality infrastructure. Dr C. Rangarajan, chairman of the PM's Economic Advisory Council, also lent his weight by stressing the unity of financial and fiscal reforms.

A consensus already seems to be emerging, if the views of the policymakers are any indication that reforms have to be synchronised for a common purpose and universal application. Financial reforms and fiscal changes cannot be discriminatory, aimed at specific economic groups if the overall economy has to benefit. Every segment must draw value from a good road, efficient communications, just as the advantages of tax-breaks must be shared.

An agreement emerged in Mumbai, away from the hurly-burly of intra- and inter-party politics. Now it has to be permeate other key economic ministries and the States where "competitive populism," to use the Prime Minister's words, reigns. This is perhaps a bigger threat to reform consensus than uncooperative coalition allies. In Mumbai, Dr Manmohan Singh expressed the desire for excellence in research in universities and IITs; to reach that goal the right enabling environment for merit must prevail. Having set the ground rules and a time frame in Mumbai, the Prime Minister must now spread the consensus in New Delhi for systemic, not populist, reforms.

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