Hungary moves into new phase of its industrial liberalization

A stroll down Vaci Ut, Budapest's most famous and sometimes fashionable street, is a good way to view the latest in Hungarian private enterprise. A small fruit and vegetable stand set up on the sidewalk is piled high with fine new potatoes, shining tomatoes, cherries, and lemons. (The lemons are a mere 30 cents a pound. In Warsaw, such a sight would spark a near riot. Only a few weeks ago the first lemons in years showed up in ordinary shops for about $6 a pound.)

Along the street, wonderful aromas waft from a small grill where chickens turn on a six-tier spit. Several varieties of sausages, salami, cheeses, mustards, and other delicatessen fare are laid out behind glass counters. The grill is cooperative, which is something between ''private'' and ''state'' management.

The bulk of the Hungarian economy - from public utilities to large industries - remains state-owned and -run. The private sector represents only 5 percent of the market.

Hungary's ''new economic mechanism'' - reforms initiated 16 years ago - has made this mix possible. The results show up in the quality of life and the mood here. One does hear grumbles, but not the bitter and angry sort that can spell political trouble in Poland.

The government has to fight hard to keep inflation down to a creditable 7 percent and to stop this year's slide in living standards from becoming a permanent trend. Recently, a poll of 1,500 families showed 63 percent whose standard of living had gone down because pay hikes this year have not matched higher prices.

But replies from 80 percent of families polled - particularly workers - suggested overall satisfaction with the goods available in the shops which are comparable to any produced by the stronger ''industrial'' states in the East bloc.

This is supply and demand in action. And Hungary has decided to take this progressive reform process further in moving away from a centrally planned economy toward a free-market economy.

The rising cost of Soviet raw materials, for example, has hit Hungary much harder than its East European allies. At the same time, Hungarian efforts to expand trade with Western Europe and the United States have been impeded by world recession and limits on its most-favored-nation status.

Details are also now being worked out for a dramatic round of tax changes beginning next January that will initially affect industry but will in due course become a Western-style system of individual, personal income tax.

This will replace the present indirect deductions made at the place of work for social services, and it will be the first of its kind ever in the communist world.

Some officials are frankly apprehensive of the public reaction. But the new program seems as a whole to be well received by the general public.

''That is our best hope,'' a government official said. ''There is considerable public understanding for government policy and the difficulties - even though almost everyone will feel an added pinch before the program begins to produce the expected results.''

Industry will have greater independence from central authority, leaving them relatively free to determine both prices and wages for better work performance. Workers themselves - and the unions - will have greater possibilities to participate in the decisionmaking process.

Public utilities and major ''social'' industries will stay under state control. Elsewhere two new forms of management are to be introduced. There will be company councils with authority for strategic decisionmaking in bigger and medium-size enterprises, with all employees represented but with the manager in control. For smaller units there are to be elected management boards, somewhat like the workers' councils of the mid-'50s.

Some of the most striking passages in the Central Committee's key document authorizing the changes listed failure to ''enforce'' adequate incentives for management and workers alike as a reason for failures in economic performance. The document made profitability and efficiency the overriding criteria, condemned restrictive ''average'' wage regulations, and called for egalitarian attitudes to be replaced with wage differentials properly recognizing better work.

Simultaneously, the private sector is to be given yet another fillip. Credit-aided private businesses and services will absorb laid-off employees from big state enterprises. Many workers have been made redundant by efforts to cut back the present overemployment.

The aim is to avoid unemployment as such, since that could generate political pressures against the changes, when (the economists say) the most important thing is for the new program to proceed as an intact, orderly package.