Thursday, August 25 2005 11:36 Hrs (IST) - World Time -

New York: Faced with stiff opposition from Left allies on the issue of labour reforms and disinvestment, Prime Minister Manmohan Singh has said that 'extreme rigidities' of the labour market have affected the country's economic growth potential but limitations of the Coalition Government prevent him to carry out reforms in a 'big way.'

"Extreme rigidities in the labour market, inflexibility of the labour market, is not consistent in our achieving of goals in a world where demand conditions are changing so fast, technological conditions are changing so fast," he told McKinsey Quarterly, a publication of the leading global management consultancy Mc Kinsey and Co., in an interview.

Asked about the constraint his Government faces due to its coalition nature, he conceded, "There are limitation for the time being and we don't have the broad based consensus in our coalition for me to assert that I can move forward in a big way for reform in the labour market."

"But I do recognize that we should take credible action," he added.

Pointing out that the Communist Government in West Bengal appreciates the need for labour market flexibility and is moving in the areas of privatisation also, the Prime Minister said the Left parties have to be convinced that what is good for West Bengal is also good for the country.

"I haven't given up hope. I have full confidence in the patriotism of our Left colleagues to believe that in the final analysis of what is good for India, they will also be on board," he added.

"We may be slow moving but if we build a consensus that would be far more durable than any other mechanism that I know of," the Prime Minister said.

He expressed confidence that when all things are considered the reforms will have more broad based support and remarked that a politician, before he can become Statesman, has to remain in office for long enough.

The Prime Minister said he plans to identify areas where India needs a big thrust forward and set up a mechanism to bring about 'convergence' in what the State Governments do and what the Centre does so as to maintain a sustained and fast pace of development.

Identifying steel as one of the major sectors, he said the mechanism he is considering would comprise a group of 'dedicated officers' to work together to ensure that the country's three-tier system of Government does not become a bottleneck in the development effort.

The Prime Minister, who fielded questions on a wide range of issues from poverty eradication to foreign investment, said his first and foremost priority is to get rid of chronic poverty, ignorance and disease which have afflicted millions and millions of the people and thus finish the unfinished task set out by the founding fathers at the time of independence.

Singh agreed that India has a lot of backlog in improving infrastructure and said his estimates is that the country would need about 150 billion dollars in next seven to eight years to realize ambition of infrastructure which is equal to the social and economic challenges that the country faces.

Stressing that the country has made 'great progress,' particularly in the last 20 years, the Prime Minister conceded, "We are not quite where we ought to be and the next five to ten years are 'crucial' to stimulate the economic growth and to ensure that the accelerated growth benefits the poorest segment of the society."

Stating that the country needs a sustained growth of 7 to 8 per cent over next 10 to 15 years, the Prime Minister said, "We underpin that growth by strong performance of our agriculture, strong performance of our physical and social infrastructure."

Replying to a question, Singh emphasized that India needs a lot more foreign direct investment that it has got and that Indians should have ambition to move in the same league many other countries in the neighbourhood are moving.

"We may not be able to reach where the Chinese are today, but there is no reason why we should not think big about the role of foreign direct investment, particularly in the areas relating to infrastructure, where our needs for investment are very large. We need new initiatives, management skills, and I do believe that direct foreign investment can play a very important role," he said.

Talking about major initiatives that his Government has taken for improvement of infrastructure, Singh told the Quarterly that he is not saying that everything is in place. "But I think that in the last year that our Government has been in office, we have set in motion the processes through innovative public-private partnerships to explore new pathways to make the infrastructure ambitions a realisable goal," he said.