Having triumphed with GST, Jaitley turns to privatization
It’s hard to think of a finance minister who has had a busier year — and a more stressful one — than India’s Arun Jaitley. When he was first appointed to the role in May 2014 some questioned his aptitude for the job, but he has emerged as one of Narendra Modi’s better ministerial picks as well as a fierce advocate of the Indian premier. Over the past 12 months, Jaitley has faced a slew of challenges, any of which could easily have led to the departure of a lesser operator. True, he came into office at a time when India’s economy was enjoying a rare moment of serenity. He has not been forced to tackle soaraway inflation or sudden currency shocks, the bane of many of his predecessors. But he has done the simple things well, keeping inflation low and growth reasonably high while continuing to shrink the budget deficit.
Jaitley’s financial acumen has really shown through when the shadows have been at their longest. Take last year’s decision by Prime Minister Modi to pull all Rs500 ($7.77) and Rs1,000 bank notes out of circulation overnight. The decision was purpose built, designed to crack down on ‘black money’ coursing through the economy and which funded everything from under-the-table wage payments to terror activities.
Liquidity battle
With more than 90% of all consumer transactions conducted in cash, Jaitley knew he faced an uphill battle to keep enough liquidity circulating through the system. His ability to keep lenders well stocked with new bank notes and to reduce chaos to a reasonable minimum spared India from greater local unrest and opprobrium.
Then there is India’s first nationwide goods and services tax (GST), introduced in July, replacing a tangle of local levies that businesses said discouraged them from trading across state borders.
The GST, viewed as a crucial move for a country desperate to raise additional revenues to pay for new rail lines, hospitals, highways and airports, was Modi’s decision but Jaitley’s responsibility to implement and on the whole the finance minister did a sterling job. The state collected more than $14bn in fresh tax revenues in July alone, more than even Jaitley had been expecting.
The finance minister’s next quests are just as pressing. In June, he announced plans to begin the process of selling all or part of Air India, a woeful state-run carrier — and more privatisations are likely to follow. Then there’s the need to raise funds to inject fresh capital into the country’s struggling public sector lenders, which are bowed down by $191bn worth of souring debt. Any doubts that Arun Jaitley is the right man in the right job at the right time for India have now surely been dispelled.