"The Reforms Have Been Good"

On liberalisation : The reforms have been very good in opening up the economy, particularly in the manufacturing sector. The whole wave of deregulation, the removal of monopolies, the opening up of sectors, the change in the trade regime—these are major changes. The areas that remain to be reformed for sustainable long-term growth have to do with the completion of the fiscal adjustment—which means getting revenues to support critical development expenditure. There’s need for reform in the financial sector. And public enterprise reform still needs to be extended. What we are after

On privatisation : What we are after is support for a redefinition of the role of the state—to do things that are absolutely critical to a successful development effort.And we are not particularly seized on pri-vatisation as the only solution. There areconcessions that are possible—opening up sectors to competition from other partiescan help. For example, the financial sector. We have been encouraging the Government tolook to nationalised banks to meet their new equity requirements through marketissues—not because we have an ideological view on who should own the banks, butbecause it seems more important to us to put public resources into rural health schemes,safety net programmes for the truly poor, which, if properly managed, can be quiteprofitable.

On subsidised credit to the poor :The biggest subsidy in the financial sector isnot on the interest rate but on giving loans that don’t get paid back. And theseloans are not predominantly in terms of volume to the poor; they are actually to thefairly well-off and well-connected. We recognise that there is a need to be sure that thebanking system isn’t just catering to the rich and urban elite. But that can be donein ways other than having a state-run system that provides subsidised interest rates. Whenthere is a subsidy, credit tends to be allocated on the basis of who is powerful andwell-connected. The interest rate subsidy is turned into a burden on the budget, givingmixed signals to people trying to administer the credit system; and the most importantthing is they do not generate developmental benefits. We are not hung up on subsidieswhere they are well-defined, targeted, and truly go to the poor and achieve a developmentbenefit.

On the post-election scenario : There is likely to be somere-acceleration of some reform efforts almost irrespective of the outcome of the election.The parties don’t differ on the directions needed for the Indian economy. They differon particular issues of pace and sequence and balance. The completion of the fiscaladjustment, for example, I don’t think that’s a political issue. Trying to dealwith the infrastructure constraints is not political. Some areas are sensitive. I thinkthe pace at which public enterprise reform is pursued, that will depend on the make-up ofthe next Indian government.