New Delhi: The most striking change in the last weeks high-powered cabinet reshuffle was Yashwant Sinha and Jaswant Singh swapping their respective positions.

As Sinha moved out of North Block, the finance ministry abode, leaving the place to Jaswant Singh, Indias financial and economic system is poised to take a new course. Prime Minister A B Vajpayee has surely sent out a strong signal when he firmly placed the cap of Indias finance minister on the head of the man he trusts most in his cabinet.

During his tenure as finance minister, Yashwant Sinha had to take hard and uncomfortable decisions, including carrying forward the second-generation reform process. This included tax rationalisation, cutting deficits, reducing government expenditure, slashing subsidies, and initiating reforms in the financial sector.

Over the last three budgets he tried to push these reforms forward, most of which did not go down well with the public and even with the Bharatiya Janata Party (BJP) and its hard-line constituents, including the Rashtriya Swayamsevak Sangh. Lack of political support and Sinhas failure to properly communicate to his own party and the public led him to roll back some of the reform measures he pushed forward. This gained him the title Rollback Sinha.

But nobody can deny the fact that he did push through some crucial measures that spell structural reforms in the financial sector. These include debt-market reforms, setting up of specialised agencies for asset recovery and the transformation and speedy recovery of non-performing assets, especially from wilful defaulters.

He also initiated changes to make all interest rates determined by the demand and supply for credit and the softer interest rate regime. Some of the high-profile reforms, like opening up of the insurance sector for private and foreign players, ended the monopoly of state-run insurance companies like Life Insurance Corporation and General Insurance Company. This was done despite stiff opposition from trade unions and the employees of these corporations. He also started the much-needed reforms in the pension funds sector.

Sinha took some tough but unpopular measures like taxing transporters and increasing the tax base by bringing more and more sectors and people under the tax dragnet. In the last budget he proposed to halve the tax rebate allowed under Section 88 of the Income Tax Act to 10 per cent for people with incomes between Rs 1.5 lakh and Rs 5 lakh per annum.

This was seen as a harsh measure since these rebates are allowed only on long-term savings and deserved to be rolled back. He later enhanced the rebate to 15 per cent and raised the amount eligible for rebate to Rs 1 lakh against the existing limit of Rs 80,000.

He was quite unlucky in many ways. In March 2001, he presented a budget that was touted as one of the best in the recent years; it was even termed as a dream budget. But, for his bad luck, the market crashed and the whole market scam was unravelled. Also, the crisis in Unit Trust of India (UTI) also spilled over. This led him to set up a joint parliamentary committee to probe the scam.

Problems escalated in UTI where huge holes started appearing in US-64s kitty. This led to panic among unit-holders. There was also a personal allegation against Sinha, who apparently took material from Flex Industries, whose chairman is in Central Bureau of Investigation custody for bribing one senior official in the finance ministry. But Sinha managed to save his skin by making a statement in the Parliament that he is innocent and was not aware from where the election material was coming.

And, at last, Vajpayee decided that somebody whom he relies on should be brought in to handle the finances of the country. This was mainly to appease the middle-class, estranged due to some of the measures taken by Sinha. As election in several states round the corner and also the general elections not too far away, it is no wonder that the BJP government has resorted to some populous measures to win back its disgruntled votes mainly from the urban middle-class.

This forced him to bring Jaswant Singh to North Block after his successful stint as external affairs minister. Singh was the finance minister in Vajpayees 13-day government in 1996 and Vajpayee actually wanted Singh to be the finance minister, not Sinha, in 1998 when he got back power.

As it appears, the government is likely to soft-paddle on some of the contentious economic issues. Immediately after he donned the new robe, Singh had hinted at this by asserting that he wants people to have money to spend this could mean a softer tax regime. Singh also said he would get some of the pending bills passed in the Parliament.

One needs at least two months to realise how things are going to shape up under the new finance captain. But one thing is clear: Indias economic policy will take a new route. Just pray that the road is not thorny and bumpy.