A government headed by a professional economist will perforce be held to a higher standard of economic performance than any other.
It simply cannot waste the opportunity that the honeymoon and the first Budget offer it to put its economic policy into motion. From this viewpoint, the first few days after the election results were announced were a bit of a disappointment.
Coalition partners were very explicit in saying what would not be acceptable in policymaking.
But, a positive agenda took some time coming, and the draft of the Common Minimum Programme, which was reported on over the weekend, while being a little more forthcoming, suffers from the typical weakness of political manifestos. It is long on objectives and short on strategies.
There are a few axioms that the government needs to accept for it to have a realistic chance of delivering on the economy.
First, significant employment growth in industry is just not going to take place without labour market reforms, specifically with respect to job security regulations.
Granted that job security regulations cannot be done away with without a reasonable unemployment insurance scheme in place. The two have to go hand in hand. Despite arguments against it based on discrimination and impairment of efficiency, a practical solution is 'grandfathering.'
New employees and new establishments can be taken out of the coverage of the regulations. Surely, people who can't find jobs, and there are hordes of them, would prefer a job, which carries the risk of being retrenched to no job at all?
Grandfathering takes care of the approximately 9 per cent of the labour force that is in the organised sector (including government), whose interests are supposedly being protected by the opponents of labour market reforms, while significantly increasing the probability that the remaining 91 per cent will find jobs in a sector that must play its role as the leading engine of growth.
There are some significant aspects to the employment question that the government must recognise. One, whatever employment growth we have had in recent times has come in services, which are broadly exempt from job security regulations.
There is a lesson in that. Two, if anybody can implement labour market reforms, it is a government which is supported by the Left. This may seem like a paradox, but really isn't.
The Left is more closely associated with the protection of worker rights than any other and its active participation in the process of moving to a flexible labour market accompanied by a functional unemployment insurance programme will provide incumbent and potential workers with some assurance about the integrity of the process.
China should serve as an example for the merits (as also the problems) of grandfathered labour market reform.
Second, hard positions on divestment will paint the government into a corner from which the only viable short-term solution will be to raise taxes. We have already received hint that this will happen, in the form of a 2 per cent income tax surcharge.
Asking the minuscule proportion of individuals and businesses that pay taxes to pay even more may be unavoidable, but it also underscores the fundamental constraint that the government will be forced to confront sooner or later.
The country's tax base, for both direct and indirect taxes, is heavily dependent on industry. Industry simply hasn't grown fast enough to provide the kind of revenue buoyancy that the government needs to support its expenditure priorities.
Industry is, in many ways, going to be the goose that lays the golden eggs for this government. In a flexible labour market environment, it will provide both employment growth and revenue growth. Anything the government does to stifle industrial growth will come back to haunt it.
With specific reference to divestment, the decision not to sell 'profitable' public enterprises is tantamount to putting a tight lid on the process.
The vast majority that are not profitable, including the many textile mills of the National Textile Corporation, will simply not find any serious takers because they have been starved of resources for too long to be viable in today's environment.
If the government wants to use divestment to enhance resources, it just cannot avoid putting profitable units on the block. Rather than emphasising profitability, the government should simply decide in what sectors it wants to maintain a presence (as it has already done for oil and gas) and exit without any qualms from the rest.
For the enterprises it decides to retain, it should clear the way for managerial autonomy by transferring the exercise of ownership rights from ministries to a government holding company.
Third, like it or not, subsidies will be a major instrument of the government's objective of directly delivering tangible benefits to people.
Reducing the overall fiscal burden of subsidies, as well as their distortionary impact on production decisions, is not entirely incompatible with delivering subsidies to intended beneficiaries.
The problem with our system of subsidies is basically one of inefficient targeting. This is why direct transfers are a more efficient delivery system as compared with price subsidies, which cannot differentiate between intended an unintended beneficiaries.
Targeting, of course, requires precise identification, and this is what the government has to focus on as a first step to the transition from price subsidies to direct transfers.
The Congress party has claimed that its policies in the 1980s sowed the seeds of the IT revolution. Unfortunately, our IT revolution has done more for the productivity of other countries than it has done for our own.
The government has to take a giant leap forward in integrating IT into its processes. Instead of worrying about an industry that has showed that it is quite capable of looking after itself, the goal of the IT ministry should be to make the government as IT-intensive as possible.
This process should start with a centralised identification system for all citizens, which then becomes the basis for access to the government's welfare programmes. A start was made during the previous regime, but the scheme seems to have gone nowhere. It must be revived and pushed through as quickly as possible.
In the past, there has been a lot of debate on whether the country was better served by a politician or an economist as finance minister. This will now apply to the prime minister.
To conclude on the note on which I began, a government headed by an economist must, and will, be judged primarily on its economic performance. It simply cannot afford to hold back.
The writer is chief economist, Crisil. The views expressed are personal.