Reforming India: (R to L) PM Manmohan Singh, FM P. Chidambaram and Planning Commission Deputy Chairman M.S. Ahluwalia

A story is doing the rounds of South Block about how the contentious Press Note 18 came to be scrapped. After waiting for months for the relevant notification to come from the commerce ministry, Prime Minister Manmohan Singh wrote a terse letter to Commerce Minister Kamal Nath stating that he would be making the announcement at CII's Partnership Summit 2005 in Kolkata, whether the notification was issued or not.

He did exactly that on January 12, 2005-announcing his government's decision to "do away with the provisions of Press Note 18 for all future joint ventures with foreign partners". Singh added that Nath would make a detailed announcement later in the day.

That's Manmohan Singh for you. The 72-year-old economist from Nuffield College, Oxford, and India's 14th pm, is a man in a hurry. He maintains a punishing 13-hour daily schedule-8.30 a.m. in the morning to 9.30 p.m.-with an hour-long break in between, seven days a week. Singh's agenda: sustained growth with equity and social justice. He has repeatedly stressed at various fora that "Growth is not an end itself, but a means to generate employment, banish poverty, hunger and homelessness, and improve the standard of living of the mass of the people."

The pm regularly invites Left leaders-his biggest critics and also, ironically, his government's life support system-for extended breakfast meetings to convince them of the need for more reforms. The Left parties, caught between their ideological opposition to reforms and their political compulsion of keeping the NDA (the previous National Democratic Alliance government led by the BJP) out of power, have allowed themselves to be convinced by the government's sleight of hand. Mostly (see If You Can't Fight 'em, Flank 'em). The 5 per cent disinvestment of government equity in National Thermal Power Corporation is clearly just the first of more such examples. The interest rate on Employees Provident Fund has been cut from 9.5 to 8.5 per cent despite strong opposition from unions; private airlines can fly on international routes; and private players can enter the hitherto sacrosanct pension fund business (see What They Have Wrought).

Says Andrew Holland, Vice President of investment bank DSP Merrill Lynch: "The message from the UPA government is clear: Reforms are on course, though maybe not at a pace that foreign investors would have liked. But there are the compulsions of coalition politics." (See Where They Messed Up.)

Bolstering the UPA government's reformist image is the reassuring presence of 59-year-old fm Palaniappan Chidambaram. His first Budget under Singh only reinforced his credentials. Surjit Bhalla, Managing Director of Oxus Fund Management, points out that he maintained his "reformist tag" despite the pulls and pressures of the alliance partners and the Common Minimum Programme.

SINGH'S ECONOMIC A TEAM

P. Chidambaram, Finance Minister. A top-notch lawyer and a reformer at heart, he will be the lead author of another (dream?) Budget in a few weeks Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission. He was Finance Secretary in the P.V. Narasimha Rao government and today is Singh's pointman for economic reforms C. Rangarajan, Chairman, Prime Minister's Economic Advisory Council. Former Governor of RBI and the ideas man for the Manmohan Singh government Y. Venugopal Reddy, Governor, Reserve Bank of India. Singh's former colleague in the finance ministry, he enjoys the Prime Minister's complete confidence on monetary matters Rakesh Mohan, Secretary, Economic Affairs. One of the key input men for P. Chidambaram's next Budget (2005-06) Mani Shankar Aiyar, Petroleum & Natural Gas and Panchayati Raj Minister. An outspoken Nehru-Gandhi loyalist, he has revolutionised the concept of oil diplomacy in India Dayanidhi Maran, Communications & Information Technology Minister. The young DMK leader is taking the country's IT and communication revolution forward Praful Patel, Civil Aviation Minister. He has allowed private carriers to fly beyond West Asia and is in the process of signing an open skies agreement with the US Sharad Pawar, Agriculture, Food & Civil Supplies Minister. He is an old ally who supported Singh's cause and stood up for him even during Narasimha Rao's days

Chidambaram has brought a host of new services under the tax net-expanding the tax base and reducing the distortions in the tax structure-and reiterated the government's resolve to increase foreign direct investment (FDI) limits in insurance, aviation and telecom from their present levels of 26, 40 and 49 per cent respectively, to 49, 49 and 74 per cent. Already, FDI of up to 49 per cent is allowed in aviation; the rest, hopefully, will follow.

But the Harvard-educated lawyer would probably consider the proposed introduction of the state-level value-added tax (vat) from April 1, 2005, as the icing on the cake. Remember, five attempts by previous governments had resulted in failure. Says S. Madhavan, Executive Director, PricewaterhouseCoopers: "The introduction of a state-level vat will be an important step in the final integration of a unified vat-a common goods and services tax-which is the international practice."

Chidambaram can also think out of the box when necessary. When the inflation rate touched 7.5 per cent for the week ended July 31, 2004, the highest level in the last couple of years, he sought the advice of Saumitra Chaudhuri, Economic Advisor at credit rating agency ICRA and, later, a member of the pm's Economic Advisory Council, and immediately slashed duties on steel, edible oil, petroleum products and sugar. Today, the inflation rate is a more benign 5.7 per cent.

Completing the reformist Holy Trinity is the 61-year-old Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, another member of the pm's 1991 economic team. Ahluwalia's omniscience in matters economic has brought him into the Left's line of fire-remember the controversy over the inclusion of World Bank members in various Planning Commission committees? The finance ministry is also unhappy over his proposal to use the country's $130-billion-odd (Rs 5,85,000 crore) foreign exchange kitty to finance infrastructure projects. But there is no denying that he is the pm's Man Friday in the UPA government.

Having technocrats in charge of the economy has another advantage: They don't play politics with development. The Manmohan Singh government has cleared Rs 1,72,000 crore for the completion of the National Highways Development Project, the signature project of the previous NDA regime, over the next seven years. This includes the Phase III upgrade of 10,000 km of existing national highways into four/six lanes and Phase IV development of 6,396 km of national highways in the north-eastern states.

And now, with C. Rangarajan coming aboard as Chairman of the five-member pm's Economic Advisory Council, and Rakesh Mohan back in the finance ministry as Secretary, Department of Economic Affairs, the pm's Dream Team is ready (see Singh's Economic A Team). We are just waiting for the next dream Budget.