In his budget speech this year, finance minister Pranab Mukherjee had unequivocally stated that if expectations held true and the economy stabilized, then the government would by the time of the next budget revert to fiscal prudence. More recently, Prime Minister Manmohan Singh drew a linkage between financial sector reform and sustained revival in the real sector. In an interview to Mint, published on Thursday, finance secretary Ashok Chawla has restated these first principles.

Illustration: Jayachandran / Mint

First off, it is commendable that three key people in the decision making hierarchy have with such candidness renewed their faith in future reforms. And the finance minister has clearly provided political cover by linking reforms with growth—without which the United Progressive Alliance will be hard-pressed to meet its avowed commitment to the so-called aam aadmi.

It is also a reiteration of the fact that the worst is behind for the Indian economy. Barring any unexpected external shocks, it does seem the economic growth may even touch 7% in the current fiscal and accelerate in 2010-11. It is unlikely that the government will withdraw in a hurry the fiscal stimulus package, which has clearly worked; though the withdrawal of the monetary largesse has already begun—and rightly so, with inflation, led by food prices, firming up. So there are no fears of any immediate loss of momentum.

What the finance secretary left unsaid, too, is significant. Politically, the Congress has strengthened itself, following its continuous electoral wins after better- than-expected performance that powered it to a second term in the 15th general election. It has also helped that the two principal political opponents, the Left and the Bharatiya Janata Party, are severely distracted, tiding over internal crises. Along with acquiring confidence, the Congress has also changed its tack on pushing the reform agenda.

At one level, it has begun to cleverly link it with the ability to raise funds to finance social welfare programmes. At another, it has begun to make major policy changes without much fanfare—like the Reserve Bank of India initiating financial sector reform by including in its credit policy statement the decision to expand the portfolio of currency derivatives beyond the dollar and also set the stage for introduction of the much-maligned credit default swaps.

All of this seems to suggest that the government is, with the economy gradually stabilizing, setting the stage for a big-bang Union budget on 28 February. Hopefully, it won’t be a case of impressing to disappoint.

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