Sometimes, it is better to begin from a point of disadvantage rather than a point of strength. Finance Minister Yashwant Sinha has that advantage as he goes to present the Union Budget on June 1.

The economy has slowed, with growth not expected to top five per cent for the fiscal year ending next March. Growth in industry and income is expected to be the lowest in five years. The latest trade figures show a dismal two per cent growth compared to 22 per cent clocked a couple of years ago. And revenue collection -- a critical benchmark keeping in mind the government of India’s spiralling revenue expenditure -- has dipped by another $1.2 billion as final figures for 1997-98 came in.

When this is combined with policy logjam, there is no place but up. Unless policy makers choose the easier political option, and decide that downhill offers the better course. The signals are to be watched now. After the budget it is always too late.

Here, more than on Sinha, it will depend on how Prime Minister Atal Bihari Vajpayee is able to control the process, how much strength he can display to fight through the political opposition that must inevitably come from any hard-hitting policy change. It is a little know fact, but the truth is that the Finance Minister does only the number crunching. The Union Budget statement is political: the Prime Minister has the final say.

So far, the build up is impressive, though it’s mostly limited to talk.

There is a strong lobby within the Prime Minister’s close circle who have been able to push through the conviction that the best way forward is a series of hard statements even before the budget.The logic for the move is to take as many key decisions outside the purview of Parliamentary vote bank politics.

The first such move came last week, when Union Minister for Power R Kumaramangalam announced an ordinance for setting up regulatory commissions at the Central and state (federal) levels, aimed at reducing subsidies in the power sector, making state electricity boards more efficient, and placing the onus of subsidy on the state governments, rather than the Centre; so far, the common practice was for state governments to offer cheap or free electricity to farmers or the poor, and then get New Delhi to underwrite accumulated losses with grants or writing off loans outright. This, inevitably, would add to the deficit.

Just how important the relationship between what a finance minister sets out to achieve and his prime minister can do to help, or undo that, is best illustrated with the case of former finance minister P Chidambaram who, besides some ill-managed policies of his own, took the hardest fiscal hit from his own Prime Minister: I K Gujral, wrote off about Rs 10,000 crore ($ 2.5 billion) of loans from Punjab state. It ensured him a Parliamentary seat from Amritsar; it helped destroy the fiscal balance of the country’s Budget.

The Union Budget for 1998-99 has to be seen in this context.

So far, Vajpayee and his ministers are making the same hard-line noises about the economy. The point of this Budget and economic policy-making isn’t about banning foreign investment -- if somebody tells you that, you might want to ask that person to take a hike -- but about pushing through internal reform. This is why the power ordinance is a good test case.

Already, numerous political allies and opponents are making noises, saying the ordinance will ruin the farmers of their states; what they mean is that it could ruin their chances of re-election. This is rubbish. Even a poor farmer won’t mind paying a little more if he gets what he needs in the first place: ready power at the correct frequency rather than bad power that fluctuates, ruining the grid and his pumpset. The good news as far as this government is concerned is that while its political ally from Tamil Nadu, the AIADMK, led by J Jayalalitha, is raking this up as an issue, another strong political ally, Chandra Babu Naidu, who as chief minister of Andhra Pradesh and leader of the Telugu Desam Party, has gone ahead and already formed a power regulatory commission for his state.

It is this political game that Vajpayee, Sinha and ministers in key economic ministries must win.

The point is, will they?

The answers of that follow-through are not clear at all -- simply because it hasn’t happened -- but there is every indication that policy will not take a hard knock in the announcement.

Sinha has made enough tough-talking noise as far as revenue is concerned. There is absolutely no question of lower tax rates. At most, rates of excise duties will be broad-banded and in some cases, import brought to lower levels to clear anomalies (for instance, so that finished goods do not attract lower rates of duty than raw material or intermediate stage goods).

It is quite likely that there will be a mass mobilisation of domestic savings through a series of new long-term investment packages. Both micro-credit and general credit will get a boost, in continuation of the Reserve Bank of India’s recent announcements which seeks to make credit cheaper but non-inflationary for the system.

There are numerous minor details, but the main issue here is the Prime Minister’s attitude.

For almost a month after he became Prime Minister, Vajpayee said little and appeared to do even less. It was getting to a point where this public perception of inaction, especially with economic policy, had to be dispelled. If this didn’t happen, no amount of pro-business, anti-isolationist statements by the finance minister or any minister holding economic ministries would help.

At least that was taken care of at the annual general meeting of the Confederation of Indian Industry (CII) in New Delhi on April 29. Vajpayee’s speech at the convention turned out to be the most focused and strong statement of purpose by a Prime Minister since Rajiv Gandhi’s pro-business, pro-development romps in the mid-’80s. It also made statements by his ministers more credible (anything Sinha or Kumaramangalam or commerce minister Ramakrishna Hegde say these days is taken far more seriously).

Vajpayee’s speech was replete with action points. He talked of setting up task forces to monitor power projects and empowering the Foreign Investment Promotion Board to take either-or decisions within 60 days. He mentioned concentrating every major investment decision in every core area to the Prime Minister’s Office (PMO) and monitoring these projects regularly. There were other tough talking statements like paying up for services and reduced subsidies.

Now, Vajpayee will have to ensure that talk doesn’t remain talk. Though the power policy is a step ahead. Monitoring key projects and delivering timely reports will mean nothing unless these are no-nonsense progress reports which are followed up with action.

Concentrating power to an elite circle can be dangerous; such examples are strewn across South and South-East Asia in similarly-structured, often-impotent PMO-led boards of investment. Ultimately, these have affected development and hurt jobs