action, within and without 100 days. It’s a function of monetary policy loosening and fiscal measures already introduced and the steam of entrepreneurship. (Though it’s true rural sector reforms are important and can provide endogenous sources of growth.)

However, these reforms are state subjects. And if one means substantive rural reforms and not just hikes in procurement prices or a Right to Food Bill, the experience of the last five years doesn’t suggest they are likely under (3). The likelihood is greater under (4). Nor should one forget the fiscal mess. The RBI has just told us that the overall (Centre plus states) fiscal deficit is 10.8 per cent of GDP, excluding off-budget items; just as Chidambaram told us he was pressing the “pause” button on FRBM. On most keyboards, the pause button is also a “break” button. Given existing government borrowing programmes for 2009-10, FRBM has been broken in spirit. Additional public expenditure

demands under (3), (5) and (6) could break it in law and return us to automatic monetisation of deficits. The cycle of high interest rates can’t be broken. No one will touch rates on small savings and deposit rates will have a floor of 8 per cent. Priority sector lending will be at 4 per cent. How can one expect PLRs to drop below 11 per cent, even if RBI rates are cut more? With (3), (5) and (6), we are unlikely to get privatisation of PSUs too, not just on efficiency grounds, but also to bridge deficits. Privatisation is more likely with (4).

... contd.