IT SHOULD NOT have taken much time for the Prime Minister, Dr Manmohan Singh, to draft his first address to the nation, leaving the nation a tad disappointed, if not unimpressed. Economic words that have become incendiary, such as privatisation, disinvestment and labour reforms, have been deleted in favour of growth with distributive justice; for the Prime Minister reforms are not only about freeing private initiative from government thraldom. Coming from Dr Manmohan Singh, who flagged off reforms as the Finance Minister, it is an amusing conversion from an initial faith in reforms triggering growth to provide money for building an egalitarian society.

No one denies that liberalisation over the last 10 years is yet to touch the lives of millions but that cannot be sufficient cause for dropping the strategy going by the sharp step-up in GDP growth to the 6 per cent mark from the paltry 3-4 per cent earlier. The quality of life in some States such as UP and Bihar continues to be poor despite numerous yojanas run by the Centre and States over years of planning; had all the funds reached the target population, the country should not be having any poor by now. Most studies by the Planning Commission and other agencies have come across waste of public funds set aside for health and education and the promise of Dr Manmohan Singh to improve governance is not convincing. Many State governments are taking the help of non-governmental organisations to effectively reach succour to the needy; for instance, the SHG-banking initiative of Nabard. With most public services such as transport, power and water priced below the cost of production, banks have become unwilling lenders, and enhanced public spending will not solve the financial mess. Again, public services are in the hands of State governments that are short on the imperatives of prudent financial management. The previous government had started working towards creating a single market for agriculture but for that the Centre needs the support of reluctant State governments; a problem for Dr Manmohan Singh.

For the Indian economy to grow at a steady pace, bank funding of the farm sector at reasonable interest rates is critical. Farm credit at 10-12 per cent on loans above Rs 2 lakh is a profitable proposition for any bank offering corporate credit at 7 per cent. Yet the banking system refuses to pick up the rural business. Public sector banks with their rural branches and RRB outlets should by now have the financial history of rural clients, making their job that much easier. This does not make a case for the RBI fixing interest rates as any farmer will prefer bank loans at 10-12 per cent against informal credit at 32 per cent. And for the transition to take place, fewer, and not more, guidance notes to banks are needed. Like all new converts, Dr Manmohan Singh has shown an unnatural fervour for resetting the terms of growth and regressing into the past when there is evidence that minimal government is virtuous.

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