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Pranab Mukherjee steps down as Finance Minister, Manmohan Singh takes over – will things improve?




The Indian Government has a couple of standard responses when faced with any criticism regarding a slow-down or policy paralysis; with the same response being repeated when faced with downgrade threats from international credit rating agencies. These responses are either: “There is no policy paralysis”, “We are slightly down because of Greece, but be thankful we are still growing”, or through friends “These were the same agencies who graded Lehman Brothers as good investments, so why should we believe them”, or the final most logical one “we will show growth in the next quarter”.
The Government has been hit by a huge amount of adverse publicity related to its policies for escalating reform in the economy and pushing for higher growth rates, and yet any structural changes have not been implemented. Given the way that the allies have perceived that the Congress organization is itself not convinced about the need for reforms, any push by the Government is vehemently resisted by the allies and the reform movements are stopped. These in turn further reduce the credibility of the Government in being an advocate for reform, and further reduce the investments by both domestic and foreign investors. In the middle of all this, there is a perceived impression that the Government has been pushing for more drastic tax implementation in order to mop up revenue, with the budget tax measure directed against Vodafone being another step in this regard.

And behind all this has been the figure of Pranab Mukherjee. Since he is moving away from the post of the Finance Minister and stepping up to campaign for the election of the President of India, there is an analysis ongoing of his performance, and the impression is not at all favorable. During his last few years, there have been very few positive indicators from the Government side on growth oriented measures, and growth levels have really gone down. Further, the expected jump in manufacturing needed for more jobs just refuses to happen, and infrastructure growth has slowed down.
It has been indicated that Manmohan Singh did not like what was happening, but given that Pranab was the number 2 in the cabinet, and an overall lack of feeling towards reform measures in the Congress, there was no special effort from the side of the Prime Minister to change measures. Further, there was a lot of indicators from industry and economists that the tax measure against Vodafone was not well received, but Pranab Mukherjee absolutely refused to make any changes.
It is only now expected that with Pranab gone from the Government that the Prime Minister will take over the post of the Finance Minister and try to change the currency of reform. However, the expectations from the Prime Minister are at an all time low, and given his track record in being totally inept in the fight against corruption, we should not expect anything from this Prime Minister.




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