REALITY CHECK TIME

Last month was truly a cracker season for the economy. Almost everyone who had something to sell had boom stories to tell. Two-wheeler makers, for instance, sold over eight lakh motorbikes with market leader Hero Honda accounting for more than half of it. Companies are reporting healthy profits for the fifth consecutive year. Exports are growing at over 20 per cent this year. The RBI expects that GDP growth would be between 7 and 7.5 per cent. What's more, the Singh parivar at the core of the country's economic management-Manmohan Singh, Montek Singh Ahluwalia and P. Chidambaram-believes that the good crop is yet to deliver dividends.

Such is the force of good news that you could understandably be blown off your rational two feet and wonder if the Government matters. After all, this 20-party coalition has made more news for the wrong reasons than right ones. It is, however, critical to remember that the momentum for progress is coming from exogenous drivers like global growth and the impact of endogenous factors, including tax reforms and a huge liquidity overhang that makes borrowing affordable. Very simply, people are taking loans and buying homes, using credit to furnish their homes and borrowing money to buy cars and mobikes to get to work and back.

Any student of physics would tell you that momentum is mass into velocity and unless there is a next wave of reforms, the economy could well be stalled at the next traffic light-rather the next red light as they say in Delhi. Also, given the buoyant picture, this coalition's non-contractual beneficiary-the left brigade-could come up with yet another populist freebie to spend hard-earned monies on. So it is essential for those popping the bubbly lo pause before they say cheers. The pro-reforms brigade needs to seize the moment and force the issue on reforms-from opening up retail and unlocking the potential of agriculture to reforming the sinking public sector, pushing investment in infrastructure and fixing the tax-GDP ratio. Boom time optics might suggest that the Government doesn't matter but the reality is that it can definitely mar the next Holi. Unless it is forced to act on reforms. Now.