Mumbai: The impact of the change in guard in North Bock may well be felt in the country’s financial sector. With Mr P Chidambaram set to be the new home minister, there is a perception that the Indian central bank may gain more breathing space while making policy. There has been criticism over the last month or two especially in the financial capital relating to the series of policy measures, which were seen as being driven by the finance ministry. Such criticism may well be unfair to both the minister and the RBI governor, considering that policymakers globally have resorted to unconventional measures to meet the challenges arising from the global financial turmoil.
But now with the PM, himself a former RBI Governor, holding additional charge of the finance ministry, the prospects of the governor coming into his own are far greater, according to market participants. For state owned banks also, the new ministerial change could come as a breather. The chiefs of state owned banks have often faced pressure to keep lending rates low given the repeated doses of moral suasion administered by the finance minister. Such pressures may ease now.
However, a senior official in the establishment who did not want to be identified said that much of the criticism being directed against Mr. Chidambaram was unfair. “He does not suffer fools gladly and perhaps that may have put off people. But he was resolute, methodical and competent which is why he may do well in the home ministry,” he said.
This official said that the PM holding additional charge of the finance ministry could be perceived as a positive sign both locally and globally in term of ensuring continuity and signalling a pro-reform image even if it means th government has just a few months to go before polls.
With polls ahead, a full fledged budget may be a little away -which means that the finance ministry will just have to work on a vote on account. This is essentially seeking parliamentary approval for expenditure for say three or or four months beyond this fiscal year until the next budget is presented. In the interim, the PM can well opt to have another minister of state in the finance ministry to ease the pressure of work.
