Though she is a great admirer of Dr Manmohan Singh both intellectually and as a personality, Isher Judge Ahluwalia (chairperson, Icrier) believes that the time is ripe for his government to take some political risks. ?At times, decisions have to be taken, even if they are not popular. Petrol price rise and fertiliser subsidy reduction, for example, are issues that the government should come clean on. It should reach out to us all and explain how better quality of electricity can be delivered if we as consumers are willing to pay a little more. And how that will be a win-win situation. These decisions can be explained, especially after it?s clear that good economic policies have delivered.?

In her new version of India?s Economic Reforms and Development: Essays for Manmohan Singh, Ahluwalia talks about both the achievements and the challenges in charting the future course of reforms as India strives for faster, more inclusive growth. She underlines that ?more communication? on the part of the government will go a long way in convincing people of the importance of reforming in these challenging times. ?When Dr Singh says something, people believe him. He must use his credibility to convince and reassure people.? Sarika Malhotra is all ears as Ahluwalia avers that running a coalition government is not an easy job. ?It is very difficult for anyone to put themselves in his position. He has internalised a lot of flak that has come along.?

Dr Singh was at the helm of economic policymaking in 1991. Isn?t it fitting that he is in charge when we await (desperately) a second wave of reforms?

Reform is an ongoing process. In 1991, India was a closed economy, the government announced that we were breaking away from the old structures of a heavily regulated and excessively protected economy, and following a different course. So the message of reform was explicit. Having embarked on that path, and having seen the results in terms of faster economic growth, it is clear that faster growth made it possible for the government to do more for the poor through policy interventions for inclusion and social protection. Some of the things we want as reforms have emerged from the success of the old reforms. And some of the things are because the economy has moved on to a new stage, and has thrown up new challenges?like urbanisation, skills deficit and rural-urban synergy. In 1991, there was hardly any talk about urbanisation and its challenges, but as we look at the next two decades today, the most serious challenge to the growth process will be from our ability to facilitate urbanisation and build synergy between the rural and urban sectors. It?s not that 5-10 years ago there was more need of reforms.

Reforms are needed at every stage. The mindset has to be one of flexibility, adaptability and receptivity to the need of the hour.

Given that India is a much more open economy today, macroeconomic management is a more challenging task?when you have more capital flows…

India is a developing economy. We should have a current account deficit. But we should be able to finance the deficit with capital flows. Macro-economic management in an economy with capital inflows and outflows means that monetary policy has to be directed at keeping inflation in check, creating conditions for growth and generating overall confidence so that the exchange rate is not too volatile. If you are a large growing economy offering a large market to the rest of the world, investors will come. They will take some knocks. Remember when China was going though repression and unrest, investors went there because they saw the market in China. Similarly, India has its share of investor interest, and our strength is our open and transparent system with clearly defined legal rights. Policymakers, both in government and in RBI, have to ensure that basic confidence in their policies is intact. Today, with some of the proposals for retrospective amendments, that confidence is a bit shaken. We have to make investors, both domestic and foreign, feel confident about the growth prospects of the Indian economy.

But growth has also been a major cause of concern of late?

With the global slowdown, the growth rate has gone down in most countries. In India, it has slowed down less than in countries such as Brazil. But if we don?t stay the course on policies to bring the growth rate back to 8%, then we cannot achieve our goals of inclusion and poverty alleviation. You have to look after the poor. In a country where incomes and aspirations are rising, there may well be a need for redefining the poverty line. But our history of the last 30 years tells us that no matter where you draw the poverty line, poverty will only decline if you have high economic growth rates which are sustained over time. For that reason also, you have to make sure that the conditions for sustained growth are continuously watched and maintained. And that?s where it should be highlighted that growth cannot be taken for granted.

Do you think that somewhere the government started taking growth for granted?

When you have had a major global slowdown, and there are multiple challenges, it is very difficult to point a finger at what caused the slowdown. A number of things went wrong, internally and externally. But, what the experience of this year has taught us is that, growth cannot be taken for granted. Fiscal responsibility, monetary independence, investor confidence have to work together. These are also trying times because of the global environment?with petrol prices for example. Raising the petrol price to reflect the increasing price of imported fuel is a tough decision and the government has to openly come out and explain to the people why this is necessary.

One area in which the government may have not done well is that it has not communicated enough with the people. They have neither been able to explain all the good things that they were able to achieve nor explain why some tough decisions have to be taken. Communication has been a weak point of this government. India has a young population: 50% of the population is below the age of 25 and they expect better communication. I think there is a role in the government for someone to put across both the achievements and the challenges facing our economy.

But it cannot be negated that governance has been an issue?

When you have an economy that is experiencing very rapid economic growth and is going through very significant structural transformation, then institutions of governance have to adjust and adapt to all the changes in the economy: high growth rate, movement of labour and capital, evolving skill sets, new demography and, above all, rising aspirations.

Institutions take time to adjust to these developments. This is a transition phase, and institutions are showing cracks.

On the surface, it looks like a collapse of governance. Actually it is a reflection of the time needed for institutions to measure up to the new tasks. In a democracy, as we make this transition, the cracks are visible. As India moves to the next level of development, this transition will not be easy or smooth and it will always be in a noisy environment. However, underneath all this turmoil, institutions are being reformed. We should not rest, we should keep putting pressure on the government, as we want the system to change.

Ours is a strong and durable system; it may look like it?s wobbly as it is going on its own momentum. It is a system that has so many forces working on it (people, civil society, media, judiciary, Parliament, Centre, states and local governments). It may appear to be moving at a slower pace than what you might want to see, but there is an inherent strength in it. We argumentative Indians must continue to argue but not at the cost of working together to build a better society.

India?s Economic Reforms and Development: Essays for Manmohan Singh

Edited by Isher Judge Ahluwalia & IMD Little

Oxford University Press (Second Edition)

Rs. 395