India gets first woman finance minister in years to spur economy

New Delhi: Nirmala Sitharaman was appointed India’s first woman finance minister in almost five decades to steer the economy through a rocky patch of weak growth and mounting global risks.

In a surprise move, Prime Minister Narendra Modi picked Sitharaman to succeed Arun Jaitley, who chose not to take an active role in the new government because of health reasons. A former defence and trade minister, Sitharaman becomes the first woman to hold the position after Indira Gandhi, who had the post concurrently when she was prime minister.

The new finance minister inherits an economy facing a number of risks: Growth is slowing on the back of weak domestic consumption, while global demand is waning because of an escalating US-China trade war. She’ll also need to find the money to fund Modi’s populist campaign pledges without undermining the budget deficit target of 3.4% of gross domestic product for the year through March 2020.

Her first opportunity to help propel the economy is when she prepares the government’s annual budget for this year, which is due in July.

“There are tough challenges ahead especially given fiscal targets have been missed for three years,” said Shilan Shah, senior India economist at Capital Economics, Singapore. “Another weak GDP reading and pressure will rise from within the government to loosen fiscal policy.’

Prior Experience

Sitharaman, 59, was a prominent spokeswoman for the ruling BJP before becoming a minister in Modi’s cabinet in 2014. During her helm of the trade ministry, she was also assigned the role of a junior minister in the finance ministry under Jaitley.

While she doesn’t have the political heft of her predecessors including Jaitley and Palaniappan Chidambaram, she is known as a hardworking member of Modi’s team and shares a good rapport with the prime minister.

Sitharaman didn’t contest the recent general elections and is a lawmaker in the parliament’s upper house, representing the southern Indian state of Karnataka. She was, however, a key campaigner during the polls.

“Her earlier handling of ministries was impressive,” said Shubhada Rao, chief economist with Yes Bank Ltd. in Mumbai “She brings a lot of technical, professional knowledge. So there are positives in store.”

As defence minister since 2017, Sitharaman oversaw Modi’s goal of spending as much as $250 billion by 2025 on defence hardware, including jet planes, naval ships and drones, to counter China’s growing military strength in the region. She also had oversight of Modi’s flagship “Make in India” program aimed at boosting domestic manufacturing, an initiative that included a significant defence focus.

Sitharaman has also worked as a research manager for audit firm PricewaterhouseCoopers LLP in London and has a Master’s degree in economics from New Delhi’s Jawaharlal Nehru University.