What the Government needs to do is cut high tax-free rates offered on public savings, which would bring down interest rates and spur much-needed economic activity. But, the Governmentis not letting it happen, fearing voter aliena-tion.

Almost everyone agrees on the need for lower interest rates -- politicians, Government, RBI and the industry.

Inflation is low, running around 3 per cent, while banks' prime lending rates are 12 per cent plus. But, for all the brave talk of a second generation of economic reforms, ministers, despite the luxury of their first majority Government, have again retreated behind calls for building political consensus before taking any step which could upset a section of the electorate.

Failing to act fast to remove this critical obstacle to lower interest rates is tantamount to burningmoney India cannot afford and this timidity would be a symbolic blow to hopes that the BJP Government will deliver the reforms it has so loudly trumpeted.

The foot-dragging brings back into focus Standard & Poor's concern that while India had developed a strong political consensus in favour of reforms, the consensus is only for weak reforms.

The rigidity in the system caused by the fixed rates offered by provident funds, some analysts reckon, has added 100 to 200 basis points to the interest rate regime. Sceptics feel Finance Minister Yashwant Sinha is in no hurry to get the ``political consensus'' for cutting provident fund rates and postpone the decision until the annual budget in February.

-- REUTERS