Veteran Congress party leader Pranab Mukherjee takes over as finance minister at a time when Asia’s third-largest economy faces slowing growth, worsening public finances, falling exports and massive job losses.
Mukherjee, 73, has decades of experience in governance and was the foreign minister in the previous government. He also held temporary charge of the finance ministry when Prime Minister Manmohan Singh underwent heart surgery in January.
During a speech to present the interim budget in February, Mukherjee called for raising spending to shield the economy from the global slump and stem job losses.
“Conditions in the year ahead are not likely to be normal and therefore the high fiscal deficit,” Mukherjee had said, referring to a jump in government spending.
Analysts said the overriding challenge was to revive growth, getting it back on track for the 8-9 percent authorities see as a plausible economic speed limit in the 2010/11 fiscal year.
Growth is expected to have slowed to less than 7 percent in 2008/09 from rates of 9 percent or more in the previous three fiscal years, the fiscal deficit running at the highest since the early 1990s.
Expectations for fresh stimulus to protect growth and jobs have grown since the Congress-led coalition won a decisive mandate last week after a month-long general election.
“He has a stiff challenge of reviving the economy while maintaining fiscal balance,” said D.K. Joshi, principal economist at domestic credit ratings agency Crisil.
“We look forward to economic reforms and a medium-term fiscal strategy from the finance minister.”
Also a former trade minister, Mukherjee is a heavyweight in the Congress party and a confidant of party chief Sonia Gandhi.
In its five budgets since 2004, the Congress party-led coalition has raised spending on health, education and rural employment but analysts say the economy has suffered due to a lack of economic reforms.
Campaign promises and likely support packages for distressed industries mean increased expenditure that could further widen an already large fiscal deficit, which would then undermine central bank efforts to keep interest rates low to support growth.
But experts described the new finance minister as a safe pair of hands.
Mukherjee, who has degrees in law, history and political science, was the finance minister when Singh was appointed as governor of the Reserve Bank of India in the early 1980s.
EuroMoney magazine in 1984 named him as one of the world’s best finance ministers.
“He is one of the most experienced in the cabinet,” said Saumitra Chaudhuri, economic adviser with credit ratings agency ICRA.
“He will have to bring to bear both his experience and ability to deal with the problem so that the government is able to make the best job of a comparatively complicated economic and fiscal situation,” Chaudhuri said.