Asia’s third biggest economy grew at its slowest pace in 17 quarters | unemployment has hit a 45-year high | Tightening trade ropes overseas have left the rupee struggling
Former Defence minister, Nirmala Sitharaman is now the new Finance minister of India. Sitharaman’s tenure begins with several challenges in order to revive the struggling economy.
The government released its data on growth after the oath-taking ceremony of the new cabinet. Although government said that data comparison would be fault for the figure that put’s India’s growth to a 17-quarter low, there is a crying need for improvements which raises the need for urgent actions.
- Sitharaman exchanged one heavyweight ministry for a more challenging one, becoming the only second woman FM after former PM Indira Gandhi.
- The new FM takes on the portfolio at a time when India is no more the fastest growing economy, lagging behind from China for the first time in two years.
- The GDP growth rate stands at 5.8% for the January-March period whereas the unemployment hit a 45-year high at 6.1% for 2017-18.
- India is also witnessing strained trade relations overseas, with US President Trump deciding to end the preferential trade treatment and Japan and South Korea tightening the grip on Steel imports.
The most pressing need for the new FM is to revive the credit channels and increase cashflow in the economy. Interest rate cuts might be on the horizon, but public banks are failing to hold their ground due to mounting non-performing assets.
Actions that need execution
Economists believe there is a need to address the demand slowdown but that first requires revitalizing the credit channel.
With decreased cash flow in the economy, markets have been struggling not just due to demand slowdown but sluggish basic infrastructure expansion which puts stress on trade and ease of doing business.
RBI can provide relief in the form of monetary easing apart from restoring investment confidence. The new finance minister faces pressure from industry to catalyze the stagnating $2.7 trillion economy of India.
Is the new FM up to the task?
Some market analysts are unsure of Sitharaman’s candidature for the ministry and seems would have preferred Piyush Goyal, who sat in for ailing former FM Arun Jaitley on atleast two occasions. Yogesh Nagaonkar, Founder and CEO, Rowan Capital Advisors said,
“the ministry should have gone to Piyush Goyal, a CA who stepped into the role twice in the previous government when Jaitley was out sick.”
Goyal himself is in-charge of commerce and industry apart from railways, at a time when trade ties with the United States and other allies are somewhat straining.