JOIN US A slowing economy, sticky inflation, stalled financial sector reforms and the government battling with the image of policy paralysis are some of the major challenges before P Chidambaram who took charge of the finance ministry on Tuesday.
Steep current account and fiscal deficits that have affected investor confidence and which led to a record depreciation in the rupee will also need his attention.
Besides, investors will also be hoping Chidambaram to push forward some critical legislations, such as easing foreign direct investment rules in the retail and insurance sectors, which have seen strong political opposition from within the government and the opposition.
He is also expected to push through reforms in the financial sector especially the insurance and pension bills as well as in taxation, particularly the goods and service tax and the direct taxes code, which is due for implementation from April 1, 2013
Chidambaram, who is credited with taking India’s economy to a high growth trajectory of 9 per cent just before the global economic crisis in 2008, returns to the ministry at a time when country’s economic growth has slipped to a nine-year low of 6.5 per cent in the year just gone by.
The Harvard law graduate, who took charge as finance minister for the third time, will be watched closely by the investors and the stakeholders as his success or failure is expected to have a major bearing on UPA government’s future. With less than two years to go for the next general elections, a lot would depend on whether Chidambaram will be able to pull the economy out of the morass.
Hailed for presenting a dream budget in the late nineties, when as the then finance minister, he recalibrated tax rates and handed out a number of sops to the corporate sector. Chidambaram is liked by the corporate world as India’s finance minister. But, economists are of the view that this makes his task even more challenging as slowing economy and stalled growth may not give him enough headroom to dole out sops.
But, restoring investor confidence is likely to be high on Chidambaram’s agenda especially in the wake of the recent 2G scam case, because of which licenses issues by the Centre had to be annulled. This and the retrospective tax measures in the Vodafone case have made a dent in India’s image among overseas investors.
Chidambaram, who is known as a tough task master, will indeed have to take some tough decisions as well to bring the economy back on track, say analysts.