There is a revealing line hidden away in the text of the Financial Times’ interview with Manmohan Singh, India’s prime minister, that is published today. Asked about “the future of capitalism, especially in India”, he replies: “We are a mixed economy. We will remain a mixed economy. The public and private sector will continue to play a very important role”.

This is significant because it underlines his continuing belief in India’s public sector and his long-held reservations about wholesale privatisation.

The prime minister preceded that line with the phrase “capitalism with a human face”, which he has used several times (sometimes saying “reforms with a human face”) over the past 15 or so years.

This underlines the fact that the prime minister has never been the arch liberaliser that the international media likes to make him. He was not the architect of the 1991 economic reforms - the basic plans were drawn up between the end of Rajiv Gandhi’s 1984-1989 Congress government and 1991.

Narasimha Rao, prime minister of the Congress government elected in 1991 in the midst of a dire financial crisis, picked him as finance minister because, it is said, he reckoned that if the reforms succeeded, he (Rao) would get the credit, but if they failed he could blame ex-bureaucrat-Singh. As it turned out, Mr Rao’s calculation was wrong because the reforms were a success and Mr Singh got the credit - until the government lost its nerve in 1994-95 after unfavourable regional election results.

On privatisation, Mr Singh’s Congress-led United Progressive Alliance (UPA) government has been held back for most of the past five years primarily by the Left Front that supported the coalition till the end of last year.

But Mr Singh was content to live with some of the Left’s approach because he does not believe in privatising profitable public sector businesses (PSUs, as they are known in India – U stands for undertakings). The corollary is that he believes in privatising loss-making PSUs, which of course is unreal because they rarely find a buyer.

He does favour selling – “divesting” in PSU jargon - minority stakes, and on that he was held back by the Left. But, along with the Left, he has not seemed keen on allowing in strategic investors – which usually means a specialist private sector company that aims eventually to acquire a majority stake.

He did not seem very disappointed when, just after the current government’s Common Minimum Programme was put together in 2004, he said that no profit-making PSU would “normally” be privatised. To underline the change of policy from the former Bharatiya Janata Party-led government, the Disinvestment Ministry was scrapped and merged into the Ministry of Finance.

It is refreshing to find an economic reformer who does not charge blindly up every liberalising alley, but instead analyses what is good and practical for the country. Too often governments around the world have privatised everything they can, without analysing the pros and cons.

A senior British Treasury official once told me that it was essential to have a constant stream of privatisation candidates so as to “maintain the momentum” of the policy. If that momentum was lost, he said, it could be difficult to restart it.

In India, of course, there is no momentum to be maintained. A few companies were privatised under the 1999-2004 BJP-led government, but since 2004 there has only been minimal restructuring, some by a specialist reconstruction board (the BRPSE).

It is surely good that the prime minister takes his stand on a literally mixed economy. It does mean of course that PSUs remain over-manned and often poorly managed, but at least there is something of a debate on the issue.

Too often in India industrial policy, as I have written before, is developed by enthusiastic ministers working with equally enthusiastic private sector interests – for example on foreign direct investment rules, special economic zones, and airport privatisation (where Indian private sector companies are primarily interested in low-cost land acquisition and property development, not running top class airports).

There now needs to be a debate on where India is going on privatisation, maybe with the prime minister setting out how far he would like to go, and in which industries.

FT’s first South Asia Correspondent (1983-88) and now writes from India - see Riding the Elephant blog