Former defence minister, Nirmala Sitharaman will be replacing Arun Jaitley as the finance minister. A second consecutive year of economic slowdown, a rise in fiscal deficit, and unemployment are some of the urgent challenges she will face. She is the first woman who will serve as the finance minister full-time.
ThePrint asks: Will Nirmala Sitharaman make a good finance minister?
Sitharaman’s lack of background in finance or economics can be an advantage
Professor, National Institute of Advanced Studies
In making Nirmala Sitharaman the new finance minister and S. Jaishankar the external affairs minister, Narendra Modi has demonstrated that no matter what he thinks of the politics of Jawaharlal Nehru University, he is quite comfortable with the products of that institution.
Sitharaman will bring to the finance ministry the force of argument that JNU instils in its students, and which she displayed in good measure, first as the party spokesperson and later as a parliamentarian.
Beyond that, her views on the economy and the current state of finances are an open book. We don’t quite know whether she will be the free market reformer that India’s industry will no doubt hope she is, or have ideological affinities to the Swadeshi Jagran Manch.
The fact that she comes with no substantial background in finance or economics may well be an advantage in the first months of her tenure. She may be more open to fresh thinking that the economy sorely needs. But with the economy entering a slowdown, its statistics in a mess, and her own not-too-distinguished record with exports when she was the commerce minister, she has clearly been thrown into the deep end. All those who have a stake in the economy will be hoping she learns to swim, and without delay.
Support from PM Modi will be far more crucial than Sitharaman’s own decision-making
Associate professor of Economics, JNU
Only time will tell whether or not Nirmala Sitharaman will make a good finance minister. But given how she has training in economics from JNU, one can safely assume she will at least understand the kind of problems our economy is currently facing.
As the finance minister, she will certainly be able to increase demand in the economy. And given that she has spent time in the ministry of commerce previously, she will also be able to use that experience to take make the economy stable.
But we must remember, the finance ministry is not an independent ministry; it is part of the overall economic framework of the Modi government. So, a lot will be contingent on how much leverage she enjoys.
The resolve comes from the Prime Minister, at least in this government. The support from Modi will be far more crucial than her own decision-making.
So, ultimately it is about government decisions as a package. For instance, agriculture is in bad shape, and the finance ministry cannot fix it by itself. It has to be done in collaboration with the agricultural ministry and other ministries involved. I think it has to be a collective effort, individual ministers can play a role but the responsibility ultimately lies with the entire government.
From party spokesperson to defence minister, Sitharaman has always proved she can get the job done
Associate Professor, NIPFP
Nirmala Sitharaman has been a rising star in Indian politics. From a party spokesperson to defence minister, she has proved that she can get the job done. As finance minister in the new NDA government, she has several challenges – banks and NBFCs are in trouble, there is a demand slowdown, investment needs to improve, and the economy may well be on the cusp of a long-term slowdown. Solving these problems will require a big picture policy perspective, and the resolve to take tough decisions. Sitharaman is well positioned to understand the trade-offs between the various feasible policy options and take the appropriate decision.
There are other long-term reforms that need to be re-initiated. For example, the Financial Sector Legislative Reforms Commission (FSLRC) had suggested several changes on the structure of the regulatory framework, consumer protection and the setting up of a redressal agency, and setting up of a Financial Data Management Centre, a resolution which came close to being set up through the FRDI bill but had to be rolled back. And then there are troubling questions on the nature of statistics themselves. While not exactly in the domain of the finance ministry, it is in the ministry’s interest that credible numbers of GDP, employment and other aspects of the Indian economy be regularly collected and disseminated. Sitharaman has a challenging task ahead, but with her economics educational background, it is one that she can no doubt shoulder.
Views are personal.
Sitharaman shouldn’t just put out existing fires but go for real success – long-term impact on economy
Fellow, Carnegie India
Nirmala Sitharaman’s real success should be defined in terms of long-term impact on the economy, and not just in putting out the fires burning presently. This kind of success will depend on taking forward the unfinished reforms in the ministry, and initiating more structural reforms.
The key unfinished reforms include: financial sector reforms – establishing a bankruptcy resolution regime for financial firms, creating a public debt management agency, improving consumer protection in finance, enhancing accountability of regulators; privatisation of public sector firms; consolidating the numerous pragmatic changes to GST and learning from experience to move towards GST 2.0, with a simpler rate structure and easier compliance; continuing fiscal consolidation towards the revised deficit and debt targets; and improving efficiency and effectiveness of Centre’s expenditure. Bold reforms are also required in banking, direct tax laws and administration, budgeting process, design of schemes, and so on.
Sitharaman has the advantage of working in a government with enormous political capital. She has led a large ministry and also served as a minister of state in the finance ministry. She can do three things to improve her chances of success: take a leaf out of her predecessor Arun Jaitley’s book, and do the politics necessary to push through key reforms, even if imperfectly; build a stable and reliable team, comprising ministry officials and advisors with suitable skill and experience; and restructure the ministry to meet the changing demands.
Views are personal.
To insinuate that Nirmala Sitharaman’s appointment is anything but merit-based misses the mark
President, JustJobs Network and senior visiting fellow, CPR
The appointment of Nirmala Sitharaman as India’s next finance minister is a welcome development. This is not because having a woman in the role is good optics, or because women are good at managing domestic finances as some media outlets and Twitter feeds suggest. The appointment is welcome because it brings a seasoned, accomplished, and capable individual to the helm of one of the nation’s most important ministries. That minister Sitharaman is a woman flies in the face of all those who question the ability of women, but to insinuate that the appointment is anything but merit-based misses the mark.
Sitharaman’s past experiences as minister of state in the finance ministry and in the ministry of corporate affairs, then later as minister of state (independent charge) in the ministry of commerce and industry, and finally as defence minister make her uniquely qualified to deal with an increasingly fine line between national security on the one hand, and economics and finance on the other. Against this backdrop, I hope that minister Sitharaman will use the power of her position to help bridge the quest for economic growth and macroeconomic stability with a job-rich economy that works for more of its people.
By Fatima Khan, journalist at ThePrint.