It was the day the Sensex breached the 4300-mark, forex reserves touched $85.7 billion, inflation touched a 31-month low and the business confidence index recorded a new high. Lesser mortals would have hit the road with a series of "I did it" appearances. Not Finance Minister Jaswant Singh. That day-like any other day over the past year-was spent amidst papers, notes and the voice of American soprano Maria Callas for company till around 7.30 p.m. when it was time to go home.

THE REALIST: Practicality, not theories, guides Jaswant's decisions

But then Jaswant is an unconventional finance minister. In an age when ministers warble to talk the economy up, Jaswant believes in the eloquence of silence. When he took charge in July 2002 the economy was in a shambles, tied down by the worst drought in 15 years, the country was locked in eyeball-to-eyeball confrontation with Pakistan and geopolitical developments threatened oil prices, exchange rates and global economies. He didn't talk then either.

Visitors to the Finance Ministry's office in North Block would remember the torn carpets held down by stained brass rods, the strange smell of disrepair that haunted the place and the economy. Almost symbolically, Jaswant ordered a clean up of the North Block and the economy. His immediate concern was the Unit Trust of India (UTI). In his own words, the festering wound had "robbed the sense of confidence of citizens" in the financial system. Instinctively, he knew the Government had to get out of UTI. He ordered that the mutual fund be split and wound down to safeguard investors as also prevent a run on the institution.

His critics labelled the bailout of IFCI and UTI "as subsidising of the rich and their sins by the poor" and creation of a moral hazard. But for Jaswant there was "no time for ideal solutions and no scope to go wrong". The fact that the solution is about to be taught at the Harvard Business School is proof enough of having got it right. Jaswant says his interventions are guided by a fundamental precept: citizen first. The management of the economy, he points out, is not an abstract notion. So despite former finance minister Yashwant Sinha's famous one-liner, "Demand does not come from the middle class", Jaswant went ahead and cut taxes and lowered tariffs to enable affordability. Given the criticality of the middle-class vote it made eminent political sense. It also made economic sense as it was household consumption which was driving growth. Jaswant combined this with booster shots for sectors like tourism and health besides opening up infrastructure for investments on a public-private partnership (PPP). The aim: at least 6 per cent GDP growth.

Of course, he could go horribly wrong. There is a question mark on the PPP concept. If the economy doesn't log a 6-plus per cent growth and revenues dip. India could then find itself perilously close to a grave financial crisis. But Jaswant seems to have called right. The RBI, CMIE and the Board of India Today Economists are all looking at a 6 per cent plus picture. Jaswant is clearly blessed. After all, it was Sinha who carried the can during the worst years. And now he even has Indra, the rain god, doing the dance for him. However, he won't be the first finance minister who faltered. Finance ministers have missed revenue targets seven times since 1991. Interestingly, unlike his predecessors Jaswant stripped the budget process of all its trappings of glamour and secrecy. He also curtailed the annual jamboree of meetings and asked industry and trade to e-mail their suggestions. This upset the entrenched elite who lost out on the photo-op. The truth is the new system is more egalitarian and equitable as even the smaller stakeholders got a hearing.

Indeed, in his own words, Jaswant has moved decision-making from Diwaan-e-Khaas to Diwaan-e-Aam, making the process transparent. Take the last budget for instance. The Kelkar Committee report triggered a public debate on tariff and tax levels, normally the most secret parts of any budget. More importantly, if you log on to the Ministry of Finance website, the action taken on the budget report allows you to assess the gap between promise and performance.

The committee and report approach also allows for testing political waters and reconciliation of differences. The Kelkar Committee report had features not acceptable to sections of the polity. In fact, the BJP almost disowned the report. One could also argue that Jaswant had to back off on the critical issue of taxing agricultural income. But at least he triggered a debate. Besides using his stature and proximity to the prime minister, Jaswant pushed through 90 per cent of the recommendations on tax reforms both in direct and indirect taxes. The focus: curb inquisitorial systems, harassment of taxpayers and improve efficiency. So self assessment for importers is being tried out, pan cards would be allotted through UTI's network, tax refunds-already the highest this year-would soon be credited directly into bank accounts and tax clearance certificates (TCC) abolished.

"Courage, conviction and ability to execute are his key assets." Anil Ambani, Vice-Chairman & MD, reliance industries

"He is willing to bet on the Indian people, it boosts confidence." Deepak Parekh, Chairman, HDFC

"He is taking decisions and the economy is responding." Rajeev Chandrashekar, Chairman, BPL Telecom

There is an economic ploughback too: efficient systems encourage tax compliance and faster refunds put more money into private pockets, enabling higher spend and hence growth. In other words, money with private individuals is proven to be more productive than when it is lying with the Government and efficient tax administration curtails creation of black money. Every year nearly 70 lakh TCCs were issued. If each TCC costs Rs 1,000, the decision has curtailed the creation of Rs 700 crore in black money.

Jaswant also understood that he did not have the convenience of hierarchy and of priorities. Despite his best efforts and the attractive revenue sharing package essayed in the budget, he could not get the states to agree on accepting the value-added tax. So even as the country waits for the political formations to accept the value-added tax so critical for states to improve their finances, he has pushed states to restructure their debts. By last month states had swapped Rs 44,000 crore worth of high-cost debt for low-cost funds.

In his decisions Jaswant is guided not so much by grand theories but by a practical approach. Take the steel sector. It was wracked by high interest costs. Mounting obligations threatened both the industry and the banking sector. Jaswant's Rs 20,000-crore package includes a Rs 5,000 crore haircut-voluntary cut-by the banking sector. A lesser minister would have been deluged by allegations of political bail-out. Not Jaswant.

To Jaswant the package was the answer to a simple question: can India afford not to have a thriving steel sector? Today steel is one of the best sectors. Says Tarun Das, director-general, CII: "His approach is consistent with the needs of the economy. His incentives have worked. The real economy is doing well."

His critics though dub these initiatives as managerial measures. A senior economist asks, "Why hasn't he used his stature to tackle substantive issues?" Topping the list of shortcomings is his inability to cut the fiscal deficit. Jaswant agrees it is a concern but just that. Others wonder why he has not tackled the Enron issue where Rs 12,000 crore of Indian financial institutions is stuck. They also point out that he, like Sinha, has failed to put together a team, nor has he applied his mind to curbing the money-for-transfer racket that rules the revenue department.

Jaswant might scoff at rating agencies but they are what he would call the objective reality. Despite burgeoning reserves and growth India continues to be rated non-investment or speculative grade. Thanks to the serious structural problems afflicting the economy. If untended India could lurch from monsoon to monsoon.

The most serious criticism he faces is one of inaccessibility. His ministerial colleagues, bureaucrats, bankers, economists and MPs complain that he may be doing the right things but he needs to connect with the ground reality.

THINKING ALIKE: Proximity to Vajpayee helped Jaswant push for critical measures

Jaswant doesn't quite agree. Perhaps his reluctance to meet people is his way of keeping off micro matters and staying focused on the big picture. Even when he does meet them, he doesn't necessarily voice an opinion. For instance, when pressed for an opinion on interest rates, he simply growled, "It is not a subject for journalistic tirade."

As one climbs the stairs towards Room No. 134, one can't help but notice the gleam bouncing off the rods holding the red carpet down, by the neat flower arrangement adorning the sculptures of Lakshmi and Nataraj, by the almost strange smell of confidence. On Dalal Street, Mint Road and Raisina Hill they call it the feel-good factor.

Jaswant more than others knows that this ephemeral sensation could vanish any day. This could be a good time to break his silence, campaign for further reforms and enable India to break the 8 per cent barrier. Then India and not just Jaswant will be on song.

INTERVIEW: JASWANT SINGH

"I see explosive growth in the next 12 months"

India's most unconventional Finance Minister Jaswant Singh spoke with Editor Prabhu Chawla and Deputy Editor Shankkar Aiyar on the new confidence in the economy: Q. Napoleon once said, 'Give me a lucky general'. It would seem in you the prime minister has found a lucky finance minister. A. It is not by chance that this economy has been managed. I think the critical factor has been the leadership of the prime minister. Q. What were the challenges you faced? A. I got the job in the midst of one of the most challenging drought in the past three or four decades. There was a global slowdown, markets in India and abroad were sliding. The Gulf War was about to break out, oil prices were volatile and we had a standoff with our neighbour. Memory being short, everyone has forgotten that after the rains. We managed drought without adding to the deficit, lived with volatile oil prices, added to our forex reserves. We did well. Q. What has been your moolah mantra? A. The economy is not an abstract notion. My focus: the citizen first. I have said this before. I am not just interested in gross domestic product. For me gross national contentment is more vital. If the GNC grows GDP will chug along. Q. The World Bank, the IMF, economists are worried about the high fiscal deficit. Are you? A. I am not sure the recipe served by the agencies has always benefited the people. I have some difficulty accepting them as the last word on economic policy. Of course I am concerned about deficit but I am not going to sit tight on the development of India. India must continue to grow. I have to find the right balance. Q. How do you manage the politics of economics? A. Quite often I have said that no textbook can teach leadership. Governance means to find the right balance between equally compelling, valid and competing interests. Q. Does the perceived proximity to the prime minister help? A. I don't function autonomously. I am a member of the Union Cabinet and it's a collective responsibility. I function under the directions of the prime minister so it is not a question of being close. The management of an economy in democracy is political. How you manage or balance is the key. Q. The Sensex has breached the 4300 mark. Are you watching it? A. I have always said that free market is not a phenomenon for a free-for-all. Freer the market the stronger the regulatory mechanism. Secondly, I don't think hard-headed investors invest money without studying the fundamentals. Q. There is a feeling that real interest rates are still high? A. I have to be able to provide a credit to industry at a globally competitive rate and simultaneously take care of the investing public. Q. Are you satisfied? A. No. But there is no perfect rate. Q. Should they drop further? A. The finance minister does not have the liberty to answer speculatively. Q. What about agriculture? Tractor loans are more expensive than car loans. A. We are working on it. As a first step we have been able to reduce interest rates for farmers from 14 per cent to 9 per cent. I had to break a wall of resistance but I am determined to break it down further. Q. Do we have a strategy to use our forex reserves productively? A. You must remember comfortable reserves are not just an economic strategy, it is part of a national reassurance. From being a ship-to-mouth economy we are repaying debts early now. It is a psychological booster. We also need to build for tomorrow. Q. The corporates feel it is not being used productively. A. Why don't the corporates put their cash reserves to productive use? Q. Is public private partnership in infrastructure happening? A. I am encouraged by your impatience. It is happening. I can't wish the systems away. Matters have to go through their paces. Believe me, success is contagious. Q. Why has FDI not picked up? A. We have made the process smooth but that is not enough. But everything is not under our control. There is another point I wish to make. It would be an error on India's part to think in terms of an FDI-driven economy. Q. How come the Finance Ministry never gets a team in place? A. You have a valid point. But look at the objective reality of the situation. What control do we have over the system of postings and transfers? The world is as it is, not as it ought to be. Q. What is the challenge now? A. To consolidate and build upon what has been achieved. There is no time to rest and no time to waste. Q. What do you see ahead? A. I believe we are about to reach criticality. I see an explosive economic growth in the next nine to 12 months. We need to be ready. Q. You have not been heard or seen. Is that by design? A. Nothing in the management of the economy is by accident. Q. So silence is a strategy. A. The finance minister's job is not a public relations job. He should not meet the media unless he has something substantial to say. Q. How would you rate yourself on the Jaswant Contentment Index on a scale of 10? A. I have miles to go before I sleep.