The commitment of Manmohan Singh's government to reforms is faltering. First, there was the great Indian hesitation over the divestment of a paltry 10 per cent of the government's 67.72 per cent stake in BHEL. Now comes the decision to call off proposed strategic sale of equity in 13 profit-making public sector undertakings (PSUs). In the staring competition between the Congress and the Communist parties, the former seems to have blinked first. This, after the government's mid-term appraisal (MTA) stressed that it would go through with the same. As signals go, this cannot be more confusing. Is the government committed to reforms and to disinvestment? From the public statements of Singh and Finance Minister P. Chidambaram, yes. Is the government going to actually go ahead with tough reforms? From its actions, no.

Need the prime minister have blinked? Not really. By the look of things, the Left parties now have even fewer supporters for their ideological opposition to privatisation than they once did. The government may have actually won over some past opponents to disinvestment with its decision to create the National Investment Fund and channel all proceeds of the process into it to be used towards social expenditure. Some of the earlier opposition to disinvestment stemmed from the fact that the receipts went into government coffers, mainly to reduce budgetary deficit. This magazine, like several conservative economists, believes that slashing the budgetary deficit is far more important than ploughing money into the National Investment Fund. After all, this should, eventually, boost growth, and that should provide the government with enough resources to fund its social budgetary obligations.

Indeed, the role of PSU disinvestment in shrinking the fiscal deficit over the past few years cannot be ignored. Currently, the budgeted fiscal deficit for 2005-06 is to the tune of Rs 1,51,144 crore or 4.3 per cent of India's GDP. Had the government gone ahead with psu disinvestment, its planned stake sales would have fetched it Rs 500 crore this fiscal and caused the deficit to decline by 20 basis points (0.2 per cent). Based on targets spelled out in the Fiscal Responsibility and Budget Management Act, the government is committed to cut the deficit-to-GDP ratio by 0.3 percentage points each year. Prior to the budget, the market was looking at a 2005-06 number of 4.1 per cent. Now, the government is likely to miss this.

Disinvestment is an economic imperative. All that is really left to be decided is the preferred mode of exit. Chidambaram professes that he is uncomfortable with the strategic sales route. But the options that remain are neither numerous nor confidence-inspiring.

True, PSUs may be allowed to raise money through the IPO route but if this is Chidambaram's route of choice, he must act quickly. Surely, the time to go for an IPO is now, when the Sensex is hitting new highs.

The disinvestment debate cannot go on for ever, and it cannot go on along current lines, where politics and ideology are cocking a snook at economic wisdom. Both Singh and Chidambaram, who know about such things, should appoint an independent panel of experts to analyse and prove once and for all that most PSUs that are being touted as profitable do not compare well with their private sector peers in terms of 'economic' profit. This would mean that the government's capital can fetch better returns elsewhere and should be enough to silence the Left.

The Indian economy cannot afford to bear the cost of the government's cold feet for long. For how long can the masses be made to wait for basic and long overdue infrastructure in the areas of transport, power, education, even agriculture? The time to act is now.