After a gap of almost four years, P. Chidambaram is back as Finance Minister and has unveiled a broad roadmap for putting the Indian economy back on the growth trajectory. Outlining the priorities, he has assured investors of clarity in tax laws, a stable tax regime, non-adversarial tax administration (much to the relief of foreign investors after retrospective tax regime was proposed by Pranab Mukherjee, the then FM), and promised to take necessary steps to achieve fiscal consolidation, price stability and stimulate investment. To this end, he has already asked economists, Vijay Kelkar, Indira Rajaraman and Sanjiv Misra, to assist the Government in formulating the path of fiscal consolidation. Apart from this, the ministry is also witnessing rejig. Raghuram Rajan, known for his frank view, has been appointed as chief economic adviser to the finance ministry. India Inc. seems to be happy at the initiatives announced by FM and believes that foreign investors would find themselves reassured and the country should see improvement in fund flow from abroad.
Though the Finance Minister has outlined the steps to boost the economy, perhaps it will take some time before we see some positive signs emerging out of these initiatives. In the meanwhile, rating agency Moody’s Analytics has revised India’s GDP estimate to 5.5% in 2012-13, squarely blaming the government as the single biggest factor weighing on business confidence and the economic outlook. While analysts argue that the downgrade is a wakeup call, the government believes that India’s fundamentals are strong and one should not draw unwarranted conclusions from the downgrade and that India would better last year’s 6.5% economic growth.