P Chidambaram took charge as finance minister on Wednesday, and got right down to work, holding review meetings with the ministry’s top financial administrators amid hopes that he will usher in a much-needed round of reforms to halt the slide in the economy.
Many expect Chidambaram, a 66-year-old, Harvard-educated, two-time finance minister, to steer India’s economy out of a web of economic mess, from a sharp slowdown in growth to a free-falling rupee, from industrial deceleration to rising prices.
From a country-wide Goods and Services Tax (GST), to a direct taxes code (DTC), from allowing foreign direct investment (FDI) in pensions and opening up the insurance sector, Chidambaram is expected to carry out the unfinished reforms agenda, most of which he had unveiled in his stint as finance minister in UPA1 between 2004 and 2008.
Industry leaders welcomed the return of Chidambaram as finance minister.
“We are confident that he will set in motion quick actions to revive flagging investor sentiments and restore the driving forces of the economy,” said Chandrajit Banerjee, director general of industrial body Confederation of Indian Industry, in a statement.
Economists and analysts expect Chidambaram to announce a string of measures to signal that the government is responding to criticism that restrictive policy environment was hurting India’s image as an investment destination.
Analysts said that controlling the fiscal deficit, a measure of public borrowing, will be a big challenge for the government as an economic slide will hit tax revenues.
“We believe slower indirect tax collection growth combined with continued high growth in government spending will push the fiscal deficit higher than the budget estimate (of 5.1% of GDP),” said Chetan Ahya of Morgan Stanley in a research report.