Finance Minister Palaniappan Chidambaram will leave his job to become India's new home minister after the resignation of Shivraj Patil in the wake of the Mumbai attacks, the government said on Sunday.
Widely criticised after a series of earlier bombings in Indian cities, Patil resigned the day after commandos ended a three-day rampage in financial capital, Mumbai, which killed nearly 200 people and triggered anger across the country.
In a statement, the Congress party-led administration said Prime Minister Manmohan Singh would take over the finance portfolio for the time being. There were no further details.
Singh, a former finance minister with a reputation for market reforms, takes over the reins of Asia's third-largest economy at a time when the global financial turmoil and domestic woes have slowed growth sharply.
India's economy witnessed sizzling growth in the past four years, averaging nearly 9 percent, but expansion is expected to slow to around 7 percent in the current financial year to March 2009.
Chidambaram, who had strongly pushed a pro-growth agenda, faced huge challenges this fiscal year as inflation soared to nearly 13 percent in early August, driven up by surging prices of commodities and oil.
A few months later, the global financial crisis hit the Indian economy and forced policymakers to slash interest rates and banks' reserve requirements to protect growth. "He (Chidambaram) should have been appointed long time back. I think he is very hard working and diligent," said Saumitra Chaudhuri, a member of Singh's Economic Advisory Council.
"The economy has now taken a back seat. First you have to ensure that these terror attacks don't take place."
Chidambaram, 63, has been the suave face of the government and has represented India at international fora including the recently concluded G20 meeting convened in Washington to restructure the global financial system.
In February's budget, he announced expansionary policies aimed at the poor ahead of federal elections in 2009 and was criticised by some for a controversial farm debt loan waiver programme that stretched government finances. (Writing by Surojit Gupta; Editing by Mark Williams and Valerie Lee)