As India’s new Government gets to work, a promise to investors

Wednesday, 28 May 2014 00:00 - - {{hitsCtrl.values.hits}}

NEW DELHI (Reuters): India’s new Finance Minister Arun Jaitley committed himself to repairing public finances and restoring investor confidence as a new administration took charge on Tuesday promising better days for millions of discontented Indians. Jaitley, an urbane corporate lawyer and close party colleague of Prime Minister Narendra Modi, was formally named to the key finance post, a day after the cabinet was inaugurated following a sweeping election victory for the Bharatiya Janata Party (BJP).

Modi campaigned on a promise to cut bureaucratic sloth and fight corruption. Analysts say his party’s decisive win gives him the mandate to advance reforms that stalled under the scandal-ridden government of his predecessor, Manmohan Singh. On Tuesday, he met his Pakistani counterpart, Nawaz Sharif, whom he had invited for his inauguration in an unprecedented gesture that his team said was aimed at building strong ties with neighbours. The BJP has long taken tough positions on national security, Pakistan in particular. However, the BJP did seek to make peace with India’s nuclear-armed rival while in power more than a decade ago, and Modi is expected to stress the need for a peaceful region to keep the focus on restoring economic growth. Growth dropped to a decade-low of below 5 percent under the outgoing government. “We have to restore back the pace of growth, contain inflation and obviously concentrate on fiscal consolidation itself,” Jaitley told reporters. Public finances are in dire straits as government spending has outpaced revenues. The new administration will immediately need to take a decision on slashing subsidy spending which is threatening a budget blow-out and a sovereign ratings downgrade. Jaitley, a student leader who was jailed during a period of emergency in 1975, will also be handling the important defence portfolio for the transition. Smaller Government Modi, who built his reputation as an economic moderniser by putting his home state of Gujarat on a high-growth path, has moved to streamline the cabinet towards a more centralised system of governing. Several government ministries have been clubbed under one minister, aimed at breaking decision-making bottlenecks widely blamed for dragging down economic growth. The new administration has 45 ministers compared with 71 in the outgoing government. Many supporters see Modi as India’s answer to the former U.S. President Ronald Reagan or British leader Margaret Thatcher, committed to shrinking the size of government. One foreign editor has ventured Modi could turn out to be “India’s Deng Xiaoping”, the leader who set China on its path of spectacular economic growth. “I am sure the political change itself sends a strong signal to the global community and also domestic investors,” Jaitley said. “I think over the next few months by expediting decision-making processes, I am sure we will be able to build that.” The chief of the BJP, Rajnath Singh, will be the country’s new home minister, charged with the task of ensuring internal stability and calming the anxieties of India’s religious minorities who see his party and its hardline Hindu affiliates as pursuing a partisan agenda. Modi himself has been dogged by allegations that he didn’t do enough to protect Muslims during an upsurge of violence in 2002. He has denied the charge and a Supreme Court-ordered investigation acquitted him of any responsibility. He named Sushma Swaraj, one of the party’s best-known faces in parliament, as foreign minister. Swaraj, who has led the health ministry in the past, is seen as a moderate within the BJP.