x Abu Dhabi, UAEWednesday 26 July 2017

Singh resumes control of finance ministry

Indian prime minister pledges to restore confidence in Asia's third-largest economy as he resumes control of the finance ministry.

NEW DELHIi // The Indian prime minister, Manmohan Singh, pledged to restore confidence in Asia's third-largest economy as he resumed control of the finance ministry after growth slowed to the weakest in almost a decade and the rupee slumped.

Mr Singh, 79, urged senior ministry officials to act quickly to revive investor sentiment as he assumed the role vacated this week by Pranab Mukherjee, who resigned to run for president.

India needs to address "problems on the tax front", as well as in the mutual funds and insurance industries, he said at a meeting in New Delhi on Wednesday.

"At the current juncture, we are passing through challenging times economically," Mr Singh said. "We need to work to get the economy going again and restart the India growth story."

Mr Singh will need to call on his experience in turning around the economy as finance chief in the 1990s, when India was on the brink of defaulting on some of its overseas debt. He now faces a budget deficit requiring record borrowing, a paralysis in policy-making that has hurt efforts to spur investment and a faltering global recovery, all of which have pushed the rupee to an unprecedented low and put the country's investment-grade rating at risk.

"Don't expect a big change yet," said Ramya Suryanarayanan, a Singapore-based economist at DBS Group Holdings. "If until now there were bottlenecks and policy logjams it's not going to miraculously disappear."

The nation's currency is down 21 per cent in the past year, the worst slide among major Asian currencies. The tumble has stoked inflation by making imports costlier.

Mr Singh said India needs to "reverse the climate of pessimism", adding that the immediate emphasis of the government is to manage the balance of payments and boost institutional flows into India.

The government's recent setbacks include the suspension in December of plans to allow foreign companies such as Wal-Mart to open supermarkets. India has also foregone investment in the pension and insurance industries in recent months.

The government, which subsidizes items from diesel to fertilizers, projects record borrowing of 5.69 trillion rupees (Dh367.33 billion) through March next year. It aims to narrow the budget gap to 5.1 per cent of GDP this fiscal year, from 5.76 per cent in the last.

Mr Mukherjee, the ruling Congress party's nominee for the presidential poll in July, quit to take part in the election. Mr Singh will head the finance ministry until Mr Mukherjee's successor is appointed, according to Pankaj Pachauri, communications adviser to the prime minister's office.

The prime minister's decision to refrain from appointing a successor immediately implies he "wants to keep the portfolio with himself for some time to push stalled reforms and lift the slowing economy in order to boost confidence", said Satish Misra, an analyst at the New Delhi-based Observer Research Foundation.