New Delhi: Prime Minister Manmohan Singh, who is a distinguished economist himself, is likely to hold charge of Finance Ministry after Pranab Mukherjee's resignation. Sources say that Manmohan Singh is seen as the best person to oversee the revival of the economy, which is facing a tough time with high inflation and poor GDP growth on one side and the global crisis on the other.
Congress President Sonia Gandhi, too, is not keen on bringing in a outsider as the next finance minister of India because of the poor state of the economy. Government sources say a team of senior bureaucrats are likely to assist Manmohan Singh.
Other senior ministers in the Union Cabinet are not seen as keen on taking over as the finance minister. With the Indian economy facing tough challenges both on the domestic as well as foreign fronts, the government and the Congress party are keen on an expert becoming the Finance Minister.
Following the Vodafone tax issue and the 2G spectrum allocation scam, foreign investors are skeptical about investing in India. But with Manmohan at the helm of the Finance Ministry the investors can be reassured that India is still a safe bet as the Prime Minister is seen as liberal and pro-reforms. The Indian economy was liberalised during his tenure as the Finance Minister in the early 1990s and he has a lot of goodwill as far a economic matters are concerned.
Home Minister P Chidambaram, who has handled the finance portfolio, has been accused by the Opposition of not doing enough to stop the 2G spectrum allocation scam and the Congress leadership is unlikely to put him in charge of the crucial ministry. He is also facing a case in connection with his election to the Lok Sabha and the party feels that if he is made the Finance Minister, there could be needless controversy and embarrassment.
The Opposition has been targeting the government for the slowing down of economy and accused it of not taking enough steps in tackling rising inflation, poor industrial production and agricultural growth.
After Pranab Mukherjee resigns from the Lok Sabha to contest the presidential election, the Congress will also have to look for a new Leader of the Lok Sabha, a position that Mukherjee handled with aplomb.
Mukherjee's last day in office on Monday as Finance Minister saw the Reserve Bank of India (RBI) hiking the limit of external commercial debt by $10 billion. Moreover, the regulator also increased the limit of overseas investment in government bonds by $5 billion to $20 billion.
In a bid to boost dollar inflow, the Finance Ministry is examining withholding the liberalisation for bonds and the withholding tax, too, is likely to be liberalised as announced in the Union Budget presented by Mukherjee.
Analysts say these measures are aimed at halting the rupee's slide and increasing the inflow of the dollar
“I would not judge the measures by what the market does in any one day but i think the prime ministers also said that you know we're going to do a number of things and I think this is a very unsettled time for markets anywhere,” said Planning Commission Deputy Chairperson Montek Singh Ahluwalia.
Economic Advisor to the Prime Minister C Rangarajan said that the RBI measures would take care of only the Rupee. “The measures announced today will take care of only one problem that is Rupee. These are single focus and economic policy is a continuing process. The correction will happen over time when capital will start flowing in,” said Rangarajan.
But the markets did not respond enthusiastically to his parting gift as the BSE benchmark shed 249 points from day's high of 17,131.15, before closing at 16,882.16, down 90.35 points due to fall in banks, technology, auto and capital goods stocks. The NSE benchmark fell 31.40 points or 0.61 per cent to 5,114.65.
Even the Indian rupee came off the day's high that was trading at 56.95, a rise of just 17 paise after hitting an intraday low of 56.42 a dollar.