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Snail's pace

FEBRUARY 28, 2001: ``There is urgent need to further deepen reforms to set the stage for higher growth... This is a Budget for carrying forward the second generation of economic reforms. This is a Budget for equity with efficiency.'' These stirring words of the Finance Minister, Mr Yashwant Sinha, that day left most of us falling over one another to congratulate him.

August 9: ``We will carry out the reforms agenda at our own pace without being hostage to anyone.'' This again is Mr Sinha, reacting to the shape-up advice handed out by rating agencies. It has left most of us wondering. Mr Sinha's testi ness is understandable. He had barely fought off the Opposition attack in Parliament on the UTI imbroglio before the S&P-Moody's duo rubbed him up the wrong way by downrating the country. But with the original zeal of reform missing, and his progr ess report showing only shortfalls and slippages, why feel piqued at being told of the truth that the nation's health is deteriorating, and rapidly too.

Yes, the economy is stuck in the rough. So are the reforms. More because of his Government's own failures and less because of things beyond its control. With its entire time and energy expended in fighting financial scams and political crises, the Govern ment is chickening out when it comes to pushing through key reforms. Mr Sinha knows the medicine required for the recovery process. He also knows it will be difficult to administer. But there are few options left. At the core of the process is agricultur e. To be fair to Mr Sinha, he acknowledged that reforms in the farm sector have been inadequate and that they need to be speeded up for improving the overall health of the country. Interlinked with this is better management of the food economy which has become more critical now than ever before. In this Mr Sinha is up against powerful State lobbies, because of whom the subsidy element is going up. As someone in charge of the country's coffers, he cannot let this go on at the cost of farm investment, whi ch is declining rapidly.

The Finance Minister swore by investments in infrastructure and other key areas. Without reform measures in place, and working, and without a promise of adequate returns, large-scale private investment will remain a mirage. One critical aspect here is, i n Mr Sinha's own words, the imposition of appropriate user charges for inputs provided and services rendered. The public sector suffered a great deal because of an indiscriminate subsidy regime and non-alignment of tariffs with costs. The private investo r will have none of it. In the same breath, who will buy public sector undertakings, with their attendant uncertainties? The less these issues are politically determined the better for the economy. For the same reason, fiscal responsibility is yet to daw n on our political class.

Mr Sinha talked of taking steps to boost public expenditure to spur demand, and even promised an additional allocation. But the big question is where will all the money come from without the Government going deeper into the red? First the Finance Ministe r must see that whatever is provided for in the Budget is spent productively. Else, it will be further fiscal distress at all levels. When competition among nations is hotting up under the WTO regime, for India to talk in terms of ``reforms at our own pa ce'' is quite meaningless.