“Revive the animal spirit in the country’s economy and reverse the climate of pessimism.” That was the first message from the new boss at the Finance Ministry to the five Secretaries who manage the gigantic task of running India’s finances.
The Prime Minister, Dr Manmohan Singh, formally took charge of the Finance Portfolio for the second time in eight years on Wednesday, after the President, Ms Pratibha Patil, accepted the resignation of Mr Pranab Mukherjee as Finance Minister.
Earlier in the day, Dr Singh met the Chairman of the Prime Minister’s Economic Advisory Council, Dr C Rangarajan, and the Deputy Chairman of the Planning Commission, Mr Montek Singh Ahluwalia. Observers expect the duo to provide the strategic thrust the economy needs to revive growth.
The markets did not react with great enthusiasm, though. The rupee fell 13 paise to an all-time closing low of Rs 57, while the Sensex shed early gains, slipping below the 17,000-mark to close at 16,967.76.
Later in the evening, Dr Singh chaired a meeting of the five Secretaries in the Finance Ministry and the Chief Economic Advisor to plan economic revival. He reportedly told them: “In the short run we need to revive investor sentiment, both domestic and international.” He indicated that the immediate emphasis was on managing the Balance of Payments, for which all policies should be directed to help institutional flows to India.
Dr Singh said that many factors have contributed to this general negative mood. There are problems on the tax front which need to be addressed. Though he did not mention about retrospective amendment, the indication is that some corrective measure will be taken soon.
Financial sector
On the financial sector, Dr Singh reportedly said that “There are issues about the mutual funds industry which need to be resolved. The insurance sector has seen a slowing down which is not normal in a country with large unmet insurance needs. This needs to be looked into.”
“There are some issues we must address in the short run and some in the long run. I am sure you will be able to work on both fronts.”
The meeting was attended by the Finance Secretary, Mr R. S. Gujral, the Economic Affairs Secretary, Mr R Gopalan, the Expenditure Secretary, Mr Sumit Bose, the Financial Services Secretary, Mr D. K Mittal, and the Disinvestment Secretary, Mr Halim Khan, besides the Chief Economic Advisor, Dr Kaushik Basu.