On the eve of his departure to The Hague for the annual India-European Union summit, Prime Minister Manmohan Singh told The Financial Times that the United Progressive Alliance government would adopt a 'carrot and stick' policy to carry forward economic reforms.
Asserting that his government would not go back on the pace of economic reforms, Dr Singh told FT that India needs to 'decentralise a lot more,' adding that there are various ways that decentralisation can work.
Laying stress on the need for the State machinery to work more effectively, he said the Centre should refrain from taking up those functions that can be accomplished at the local or the state level.
Dr Singh said his government was constantly discussing the pros and cons of various issues with the Left parties, and they on their part, too, had a reasonable appreciation of what is possible and what is not.
Discussing India's reforms agenda, the prime minister told FT that those reforms, which supports social and political cause are likely to be the most successful.
He pointed out that there are very few countries in the developing world who have been able to successfully sustained the reforms process within the 'framework of a parliamentary democracy.'
Reform can be successful only through decentralisation and strengthening Panchayati Raj institutions by giving them more power, both financial and administrative, and making them more accountable to the people they represent, he said.
In a veiled support to the process of divestment, Dr Singh said the government should throw open State enterprises 'to greater participation in the market economy.'
Elaborating on the relationship with the Left parties, he said public debate and dissent 'is a source of strength for us, not a source of weakness.' He said that the Left would not be an obstacle and his government will successfully complete its term of five years.
Answering questions on security concern over the Iran-Pakistan-India gas pipeline, he told FT that both he and President Pervez Musharraf were keen to develop the pipeline. Admitting that there were some contentious issues, he said India was also exploring other options like a gas pipeline from Myanmar.
Stating that the European Union was India's largest trading partner, the prime minister said creation of the European Economic Union was 'a great act of far-sighted statesmanship.' He hoped that a strong Indo-Pak economic relationship would also help solve other thorny issues in a peaceful manner.
Stating that outsourcing was not an India-US issue, Dr Singh said it was mutually beneficial and an integral element of globalisation. 'It is based on basic economic principles and premised on competitiveness and comparative cost advantages.' He felt it was a win-win situation for both countries.
The prime minister told FT: 'Any suggestion that this is an effort to attract jobs away or to deprive workers of their livelihood -- and to link this to possible conditionalities -- contradicts the momentum of globalisation and trade liberalisation.'
He pointed out that Indo-US relations are closer than ever before and there was scope for further development of a bilateral strategic partnership. 'I told President (George W) Bush, and he agreed with me that the best in India-US relations is yet to come.'