The Finance Minister Is IN

Pranab Mukherjee’s recent appointment as India’s new Finance Minister has received a widespread ‘Thumbs Up’ from corporate to middle class India alike. The new Finance Minister’s priority will also be towards bringing in social reform which was extensively promised in his Congress Party’s election manifesto. The 74 year old clearly has his work cut out for him. He takes over a Finance Ministry that has been dealing without a leader for quite some time. In this article we take a look at the key areas the new Finance Ministry needs to deal with.

1.       Fiscal Deficit: In his first few media appearances Pranab Mukherjee has said the right things. He has mentioned the need to maintain a healthy fiscal deficit. The current fiscal gap is widening thanks to a disappointing 2008 heightened by the global economic crisis. Fiscal governance is thus of prime importance.

2.       Kick starting the export sector: Exports have taken a nosedive the past four quarters. This is easily the hardest hit sector in the Indian economy. Thousands of workers in this sector have been laid off or have had to see their wages being cut. Areas of immediate concern are those which are directly dependent on the United States and Europe like the precious stones sector, the leather industry and the textiles industry. IT too is a problem with outsourced work having dropped sharply.

3.       Employment generation: Employment figures have dropped .This has contributed to the fiscal deficit. Jobs have been lost in the IT sector, Banking sector, Textiles industry and the Manufacturing sector.

4.       Manufacturing Growth: Is very disappointing. Monthly levels of industrial production have fallen. Labor intensive industries have suffered. There have been large scale layoffs because of the recession. There have been huge losses in the industrial sector.

5.       Stimulus: The previous government was accused of not being proactive.There is hope that the same method won’t be the case in the present government. Most of the key personnel are the same but there is a need to hurry up with comprehensive and substantive stimulus packages. The last time around the stimulus packages were either small or were far in between .The government needs to release stimulus at shorter intervals and make sure that they’re larger amounts.

6.       Oil Pricing: The Finance Ministry had authorized the Petroleum Ministry to reduce the price of fuel. Petrol and cheaper hence became cheaper. Now that the government is in a comfortable position, the decision to raise the price of petrol depends on the price of crude oil which is at a higher level now ,than when the price cut happened. Meant to be an election sop the government doesn’t need to stick with low rates. Many have therefore called for a market pricing system for oil.

Perhaps the most refreshing and optimistic fact has been the emphatic ‘YES’ to the question of the next budget. The government presented an interim budget in February which was a disappointment. They could have chosen to do the same now also instead they have opted for the right move of presenting a full fledged budget which we could see as early as the first week of July.