Will the original reformer hit back with a vengeance this budget session?

Is the die-hard reformer back to his winning ways? Emerging from the barrage of criticism directed against him these past several months for his silence on key issues and the policy paralysis faced by his UPA II government, Prime Minister Manmohan Singh appears to have taken things into his own hands in a bid to bring the reform agenda back on the frontburner.

At least that’s the signal which seems to be emanating from New Delhi as frenetic activity on the economy front takes place at the policymaking level. Consider some immediate facts: Wednesday saw the Empowered Group of Ministers (EGoM) meeting to provide a much-needed push to get the disinvestment process back on track, and two key disinvestment plans - that of ONGC and BHEL - are now on the anvil.

That apart, the Prime Minister’s Office (PMO) also announced on - hold your breath - Twitter that the government had initiated clearance of coal supplies to private sector power producers. The markets have also shot up sharply, with the 30-share benchmark Sensex climbing around 350 points and analysts getting into animated discussion on whether we are witnessing the beginning of a bull phase.

Taken together, these actions point to the fact that Prime Minister Manmohan Singh and his team are now driving the reform agenda hard, ahead of a Union Budget which could well hold the key to how the Indian economy will fare over the next few years. Shaking off the perception that the government is hamstrung by inaction and a strident Opposition keen to nail it on several counts, the PMO, armed with the presence of new Principal Secretary Pulok Chatterjee, appears to have got cracking on the job.

And about time too. The Rs 40,000 crore disinvestment target for the year is a distant dream, and the government needs to act swiftly to fill the huge shortfall at least partially. Quick follow-on offers for ONGC and BHEL are, therefore, an absolute necessity. Only the modalities need be discussed; the fact that these two companies must shed stakes in the market to bring some much-needed money into the coffers is a given.

A Business Standard report reckons that the disinvestment in these two state-owned companies may likely fetch the government around Rs 14,500 crore . The government stakes in several state-owned companies are still comfortably high, and small stake sales will have no impact on control and, hence, no political fallout. Speed, however, is of essence now, with the markets looking up.

A report in The Economic Times also points to how the PM had been taking key meetings to spur economic activity and bring some key economic agenda items back on the table. Not just on coal supply which has been a major problem area for private power producers, but also on other areas like highway implementation, foreign investment and spends by public sector undertakings, the PMO has been actively trying to fix things of late.

Analysts have already been expressing bullishness about these steps taken by the PMO. Some have now predicted increased investment activity by PSUs, leading to better growth momentum, and also a speedy resolution of the problems faced by the power sector as supply constraints get eased.

The leaders of India Inc. also seem to be applauding the PM’s efforts. The ET report also quotes Deepak Parekh saying that the PM and his officials are leading from the front and that there’s ‘a new energy in the air.’

The market feels this ‘big-bang New Year entry’ of the PMO on the policy making scene has been a positive surprise. Says a note titled ‘The Policymaker’ from broking firm Motilal Oswal: “January 2012 has been a power-packed month for the PMO; its actions have caused the business environment to turn from negative to cautiously optimistic.”

Analysts and policywatchers point to some key moves. First, the PM himself underscored his commitment to reform and called on industrialists not to fall prey to negativity. On the power sector in particular, a time-bound, sector-specific reform agenda is now on the anvil. The market says the progress so far after the PM’s meeting with CEOs has been impressive. Wednesday’s decision on coal is further proof of that resolve.

On the PSU front, a tight monitoring system has been put in place to track investment plans of cash rich PSUs.

Promotion of tourism, de-regulation of sugar and development of inland waterways transport are some of the other areas where activity is taking place.

The perceived ‘governance deficit’ facing the country had led to the UPA government and, in particular, the Prime Minister himself coming in for sharp criticism from the business community and the public at large.

Adding to this mounting criticism was an open letter written recently by eminent citizens, where they urged the government to act decisively on corruption and address this governance deficit.

What came as a major, if not decisive, blow was the statement by Reserve Bank of India (RBI) governor Duvvuri Subbarao on policy and administrative uncertainty. Unveiling his review of the monetary policy in end-January, the governor, in one of the sharpest criticisms of the government by any RBI boss, had made it clear that credible fiscal consolidation by government was the need of the hour, and that the Union Budget would hold the key. “The forthcoming Union Budget must exploit the opportunity to begin this process in a credible and sustainable way,” Subbarao had said.

The good news is that the PMO now appears to have taken things in its own hands in a bid to get things going. Whether the momentum is sustained remains to be seen. More importantly, the real signal will lie in the Union Budget, to be presented on 16 March. That, more than anything else, will demonstrate how far the reformer in Manmohan Singh is willing to go to bring a sputtering economy back on track.