Nirmala Sitharaman's appointment as the finance minister in the new Modi government came as a big surprise since speculations were rife that BJP President Amit Shah could be assigned the portfolio. Nirmala Sitharaman is not new to the Ministry of Finance. She had earlier served as the Minister of State in the finance ministry before becoming the full-time defence minister in the Modi government.
Sitharaman has also served as a Minister of State (Independent Charge) for Commerce & Industry. In addition, she was also made Minister of State for Finance and Corporate Affairs in the Modi government.
The appointment is important from the perspective of the economy, which is currently facing multiple headwinds.
Ajay Bodke, CEO PMS at Prabhudas Lilladher said, "With an illustrious academic background in the sphere of economics (Masters in Economics from JNU), a Doctorate in Indo-European Textile Trade, a stint in leading consultancy Pricewaterhouse Coopers as well as a reasonably successful stint as the Defence and Commerce Minister in the previous term of the government; Nirmala Sitharaman is eminently qualified to steer India's economy which is facing multiple headwinds of slowing consumption impulses, moribund private capex cycle and anemic exports.
Unprecedented squeeze in liquidity due to crisis in NBFC sector and consequent spike in risk aversion has severely impacted aggregate demand. Sectors such as real estate, automobiles, consumer goods etc need an immediate respite."
On the need to adhere to fiscal consolidation, Bodke said, "She will need to strike a delicate balance between the re-distributive policies advocated by PM Modi towards the poor and downtrodden and yet ensure government's firm commitment to adhere to medium term fiscal consolidation"
VK Vijayakumar, Chief Investment Strategist at Geojit said, "Nirmala Sitharaman, a surprise choice as finance minister, assumes charge at a time when the economy is facing some strong headwinds. She has to address the slowdown in the economy with an immediate focus on the crisis in the NBFC sector which has led to a massive liquidity squeeze in the economy.
The fact that the global economy is slowing down makes her task all the more challenging. Her earlier tenure at the finance ministry as minister of state and later at the commerce ministry with independent charge will stand her in good stead in steering the economy in these difficult times."
On the expectations of market from the new FM, Vijayakumar said, "The market is now being driven by a hope rally. The hope is that the strong government will get down to the business of serious reforms that can arrest the slowdown and revive growth. The future trend in the market will depend on what the government does and the message the new FM gives. However, it is important to note that the market, in the short-term, will be driven by its own momentum. There is no valuation comfort in the market now and the global environment is unfavourable."
Parth Nayati,Co-Founder and COO at TradingBells said, "Sitharaman has done good work with all portfolios that she has handled. We expect the markets to be neutral towards this news in the coming week. It will be wait and watch for any major decisions that could be taken at a later stage."
Amar Ambani, President and Research Head at YES Securities said, "Nirmala Sitharaman is an excellent choice as Finance Minister in PM Modi's 2.0 Cabinet team of ministers. Besides having relevant qualifications as MA in Economics, she has played varied roles in corporate life, including work related to field of economics.
In her political career, Sitharaman has served as MOS with independent charge for Finance and Corporate Affairs, as well as minister of Commerce and Industry for three years.
This qualifies her for the big role and we remain hopeful, seeing her illustrious record. She has done justice to the portfolios managed so far, whether as national spokesperson or even as defence minister, with facts and figures in place. She has a strong personality and seems like a task-master with an eye for detail; qualities that are much needed to bring sweeping change."
Garima Kapoor, Economist at Elara Capital said, "This allocation has come as a surprise, but I would say Nirmala has done a fairly good job as defence minister and she has proved her acumen. I think she fits the bill better than anyone else.
After Jaitley, she's the best bet that Modi could have had as she has worked under the finance ministry as MoS, has domain knowledge as she has economics post graduate and has also worked in the sector, so all the main boxes are ticked.
Nirmala also did a fantastic job defending the Rafale deal in Parliament, and did a good a job in whatever little time she was handling defence, so this may also be kind of a reward for a job well done.
Simplification of GST, measures to revive consumption, recapitalization of PSU Banks and addressing the dislocation in financial sector especially NBFCs remain key tasks to address."
Romesh Tiwari, Head of Research at CapitalAim said," Nirmala Sitharaman as the new finance minister is the right choice given her academic background in economics. She will have to face challenges of the slowdown in domestic consumption and liquidity issues. She will also be heading Corporate Affairs ministry and that will give her more avenues for implementing broadly structured policies for setting long-term growth of the economy.
The market will be keenly watching the first Cabinet meeting of the new Modi government for any signal for change in economic policies but there may not be any significant declaration on the very first meet."
Edited by Aseem Thapliyal