Nearly 16 years after he first took over as Finance Minister under the United Front Government, Palaniappan Chidambaram is back to doing what he knows and does best: Drive the economic reforms agenda for the UPA-II Government and lift the country out of the economic slowdown.
While his appointment as the top boss of North Block did raise quite a few eyebrows over his alleged role in the 2G spectrum scam and reports of Chidambaram misusing the office of Finance Minister to help his son Karti acquire 5 per cent stake in mobile operator Aircel as a condition for approval of Malaysia’s Maxis Communications investment in Aircel, the decision to move him back to North Block shows Prime Minister Manmohan Singh’s trust in him as the person who can script the much-needed turnaround the bruised and battered Indian economy needs.
More than anything else, it also reflects the government’s strong resolve to take forward the unfinished agenda left by his predecessor former Finance Minister and now President Pranab Mukherjee.
The big question really is: Can the Harvard Business School educated lawyer do an encore this time too as he did in previous stints? The opinion is divided.
“It is an uphill task but surmountable. It is a matter of perception which can be changed if not overnight but soon enough. India is incidentally making news for all the wrong reasons and the perception needs to be changed. There have to be clear demonstrations by the government about its intent and it has to get a firmer control on reforms and policies. What he has inherited is a strong legacy where fundamentals are still strong and there are no rapid foreign direct investment (FDI) outflows. In fact, India continues to a very preferred investment destination still,” says a senior finance ministry official who has worked very closely with Chidambaram in the past.
Chidambaram’s appointment as Finance Minister comes at a very critical juncture for both the Indian economy as well as the UPA Government. With General Elections slated for 2014, the government surely will not want to face the electorate with a poor scorecard on the economic policy front.
While the economic challenges are too many, markets and India Inc believe that Chidambaram has in him to deliver and keep intact the India Growth story, not only for domestic investors but especially for overseas ones. Hailed for his deft handling of the economy during the global financial crisis in 2008, his four-year stint as Finance Minister in UPA-I saw economic growth averaging about 9 per cent.
The context and the environment is now totally different. With economic growth in the January-March quarter plummeting to 5.3 per cent and to 6.5 per cent for 2011-12 fiscal, headline inflation that is still hovering above 7 per cent, a burgeoning fiscal deficit that overshot the 2012-13 Budget target of 5.1 per cent and a rising current deficit, the MP from Sivaganga in Tamil Nadu has his task cut out.
“At a time when gross domestic product (GDP) growth is slowing, there is need for fiscal consolidation, fast-tracking of 50 signature infrastructure projects and investor friendly fiscal policy. He will set in motion quick actions to revive flagging investor sentiments and restore the driving forces of the economy,” says Chandrajit Banerjee, Director General, Confederation of Indian Industry (CII).