May 21, 2014


[People close to the party and economists say the front-runner for the post of finance minister, who will also be tasked with restoring foreign investors’ confidence in India, appears to be Arun Jaitley, a senior B.J.P. leader. Mr. Jaitley, who lost in his electoral debut in Amritsar in the state of Punjab, previously served as the minister of commerce and industry and the minister of law and justice in the B.J.P.- led National Democratic Alliance government, which governed from 1998 to 2004.]

By Neha Thirani Bagri

Prakash Singh/Agence France-Presse — Getty Images

Arun Jaitley, a senior leader of the Bharatiya Janata Party, arriving at the Parliament house 

in New Delhi on Tuesday.

MUMBAI, India — As the Bharatiya Janata Party and Narendra Modi, the prime minister-elect, begin to discuss the allocation of key cabinet positions, investors’ eyes are on one key appointment – that of the country’s finance minister, who will be responsible for steering India’s foundering economy to calm waters.
News and analysis on the world’s largest election.
Domestic and foreign investors and businesses are also waiting on the announcement of the new government’s first budget, while keeping tabs on speculation about a possible change in leadership at the central bank.
People close to the party and economists say the front-runner for the post of finance minister, who will also be tasked with restoring foreign investors’ confidence in India, appears to be Arun Jaitley, a senior B.J.P. leader. Mr. Jaitley, who lost in his electoral debut in Amritsar in the state of Punjab, previously served as the minister of commerce and industry and the minister of law and justice in the B.J.P.- led National Democratic Alliance government, which governed from 1998 to 2004.
In February, Mr. Jaitley remarked, rather tellingly, that the current finance minister, P. Chidambaram, would leave a troubling legacy for his successor.
Another contender whose name is making the rounds is Arun Shourie, a senior B.J.P. politician and former minister of disinvestment, communications and information technology in the National Democratic Alliance government. He has also worked as an economist at the World Bank.
People with knowledge of the matter have suggested that a technocrat and party outsider like Deepak Parekh, chairman of HDFC Bank, or K.V. Kamath, chairman of ICICI Bank, could be named finance minister.
“If Mr. Modi chooses a pro-reform technocrat from outside the political system who knows the financial market or is from the financial market, such as Deepak Parekh, the markets would see this as a positive move,” said Sujan Hajra, chief economist and executive director of institutional equity at AnandRathi Financial Services in Mumbai.
“But given the kind of majority the B.J.P. has got, and the kind of control Mr. Narendra Modi would like to exercise on the Finance Ministry, it is more likely that a politician will be chosen for this post,” he said.
Mr. Hajra added that given Mr. Modi’s business-friendly reputation, he is expected to work closely with the Finance Ministry in deciding the course of India’s economy, so the markets are unlikely to react negatively to his choice of a finance minister unless it is a complete surprise.
The announcement of the new government’s first budget, its economic road map, is the next big inflection point for the market and is expected by July.
“Judging from the anticipation in the markets since the exit poll results, for the budget the expectations will run sky high,” said Dilip Bhat, joint managing director of Prabhudas Lilladher, a Mumbai-based brokerage. “There are some immediate actions which the market is looking forward to, such as the announcement of pending road projects, that would create a multiplier effect in terms of jobs and incomes for workers across geographies.”
He added that he expected that public sector undertakings would be given greater independence to chart their own course of action and that some measures would be announced to get stalled infrastructure projects off the ground.
Analysts expect the new government’s budget to differ from those of the Congress-led government in that it will focus on encouraging investment over consumption, by reining in subsidies and stepping up infrastructure and investment projects. Many expect the government to announce a revamping of the tax structure, something investors have been eagerly awaiting.
“Mr. Modi needs to put in place a framework to stimulate demand in the economy, and simultaneously spur private investment,” said Rahul Arora, the chief executive for institutional equities at Nirmal Bang Securities, a brokerage based in Mumbai. “The markets are waiting for his views on a taxation overhaul, the implementation of the goods and services tax and a timeline on the Direct Taxes Code.”
He predicted that the current rally in the Indian stock markets, which have jumped since Mr. Modi and his party won a solid majority in the lower house of Parliament, could be sustained until the budget is revealed, and that the budget could fuel an even longer rally if it meets investor expectations.
One possible action that could lead to a correction or drop in the stock market is a change in leadership at the country’s central bank. Raghuram Rajan, who was appointed governor of the Reserve Bank of India in September, has been credited with stabilizing the currency, stemming inflation and improving the country’s fiscal deficit position.
However, since he has taken over, he has raised the benchmark repo rate, the rate at which the central bank lends to banks, three times — by a total of 0.75 percentage point to reach 8 percent — to tackle inflation, a problem that has long dogged India.
Such moves have been criticized by members of the B.J.P., including Piyush Goyal, national treasurer for the party, who said, “I think Governor Rajan is only aggravating the problems and making it worse by increasing interest rates.” He added that the B.J.P. would combat inflation by increasing investment and accelerating economic growth.
There has been widespread speculation about the possibility of Mr. Rajan’s dismissal by a B.J.P.-led government, though he has denied any rift with the party. Mr. Jaitley has criticized the use of interest rates to curtail inflation but has been quiet on the subject of Mr. Rajan’s dismissal.
“If someone is doing a good job, he will certainly continue,” he said in a television interview.
Because Mr. Rajan has been viewed favorably by both domestic and foreign investors, analysts said a change in leadership at the central bank would be counterproductive. Mr. Parekh of HDFC Bank toldThe Economic Times this month that replacing Mr. Rajan at the helm of the central bank could lead to a downgrade in India’s sovereign credit rating.
“The removal of Mr. Rajan would not be a positive signal to investors,” said Leif Lybecker Eskesen, chief economist for India and Southeast Asia at HSBC Global Research in Singapore. “One of the things that the governor has achieved is to strengthen the credibility of the institution, tightening monetary policy. You need to create credibility in monetary policy and bring about macro stability to encourage investment in the economy.”
Besides, he said, the low levels of investment in India should be attributed to structural problems, not high interest rates. “Inflation remains too high, and I think the notion that interest rates should be cut to support investment growth is inherently flawed,” he said.
The post of Reserve Bank governor has traditionally been treated as independent by governments, and economists predicted that the government would not remove Mr. Rajan so early in his tenure.

“I would find it very difficult for a new government to replace a popular and an effective governor especially so early at the job,” said Tushar Poddar, chief India economist for Goldman Sachs in Mumbai.


Former Italian leader defends his relationship with German chancellor on Newsnight and says scandal claims are lies

By Haroon Siddique
With less than a month remaining in his role as Newsnight's rottweiler-in-chief, Jeremy Paxman has added another high-profile scalp to his legacy of public-figure grillings.

Demonstrating that his decision to leave the programme after 25 years has not doused any of the fire in his notoriously combative interview technique, he rendered the former Italian prime minister, Silvio Berlusconi, temporarily speechless after asking him: "Do you have a particular problem with Angela Merkel? Is it true you called her an unf***kable lard-arse?"

The question, which followed a series of innocuous warm-up questions posed to the scandal-ridden former Italian leader about the EU and the euro, appeared to leave him momentarily stunned as an interpreter relayed it to him through an earpiece. When he recovered his composure, he said that he had never insulted anyone in 20 years of politics and that the alleged insult was "made up by someone who wanted to turn Angela Merkel against me". Warming to the theme, an amused-looking Paxman also asked Berlusconi if the incident when he jumped out from behind a monument and said "cuckoo" to the German chancellor "was just a joke".

The former Italian leader, who was forced to resign in November 2011 after losing his parliamentary majority, insisted that far from being an insult, it was testament to his close relationship with Merkel. "She enjoyed it," he replied. "I explained why I did the cuckoo thing. A few days earlier I had been to St Petersburg to visit [Vladimir] Putin. Putin hid behind a pillar and did cuckoo to me from behind. Merkel and I were on really good terms so when she came to Trieste, I thought of what Putin had done and I basically hid behind a monument and did the same thing. It was funny."

The 77-year-old billionaire's time in office was blighted by a succession of scandals, leading Paxman to say that it was "unfortunate that as far as much of the rest of the world is concerned, the reputation you have is all about your private life. It's about corruption and unpaid taxes and bunga bunga parties".

Berlusconi responded that 46 out of 47 cases against him were dismissed, and that "lies" were responsible for his reputation abroad. "Italians know very well that none of these facts are true," he claimed, adding that the bunga bunga accusations – that he had sex with underage prostitutes – were "ridiculous".
Berlusconi used the interview to denounce Beppe Grillo, the head of Italy's anti-establishment Five Star party, comparing him to Stalin and Pol Pot, and concluding: "I want to go down in history as a father of the country and as my legacy, a conservative centre-right government to protect Italy from a dictator like Grillo."

Meanwhile, Paxman has secured his own legacy of making the likes of Berlusconi squirm. The interview is likely to be filed alongside other memorable moments such as when he asked Michael Howard the same question a dozen times and questioned Tony Blair as to whether he and the US president, George W Bush, prayed together.

@ The Guardian