Pro-market reformer and Harvard-educated Mr P. Chidambaram's return for the third term since 1996 as Finance Minister may well prove to be his most challenging so far. In his last tenure from 2004-2008 he steered India's economy to its highest average annual growth rate of 9%. However, he takes charge this time when India's economy is growing at its slowest pace in 10 years. Other challenges include: stubbornly high inflation at over 7%, a ballooning fiscal deficit which is very tough to reduce as it is politically difficult to cut subsidies, foreign investor alarm at tax proposals which are perceived as unfair. However, hopes are high for progress after he made calming statements that foreign investors' concerns will be addressed shortly. His move last week to swap high officials between the revenue and expenditure departments of the tax offices signals that priorities and focus may change. And that retrospective tax proposals may be diluted to allay the alarm caused.

And:

Highly respected and outspoken former IMF Chief Economist Mr Raghuram Rajan has been chosen by Mr Chidambaram as his Chief Economic Advisor. Mr Rajan, currently a Professor at Chicago University's Booth School of Business is credited with predicting the 2008 global financial crisis. In a speech to PM Dr Singh earlier this year he was openly critical of New Delhi's populist policies and said corrupt relationships between politicians and businessmen were creating an oligarchy. Excellent credentials. A very good appointment.

David Fuller's view Governance is everything, as we never tire of saying at Fullermoney and India is upgrading its cabinet. There is certainly plenty for them to do but 'needs must' is a great motivator.

India's stock market action (historic, monthly & weekly) suggests that investor interest is slowly returning following a dismal performance since the peak in November 2011.

Here is an excellent article from Bloomberg on how India succeeded initially, what went wrong more recently and what the government needs to do now: "Rejuvenating India's Growth." Here is the conclusion, posted without further comment:


The prime minister blamed a lack of political consensus for recent policy reversals and slowing growth -- an echo of the favorite excuse from the pre-reform era. He's right. He leads a turbulent coalition, shares de facto power with Sonia Gandhi, and is opposed at every turn by the Hindu-populist Bharatiya Janata Party.

It's hard to be India's prime minister, all right, but leaders have to build consensus, and Singh is failing. In the early 1990s, an economic crisis provided the initial momentum to the reform program. Today's sluggish growth is disappointing, but it isn't an emergency, so a different case for reform is needed, one based on an undisguised commitment to market forces and private enterprise. A constituency receptive to this case now exists thanks to the flowering of Indian business since 1991.

Two recent appointments offer a glimmer of optimism. Singh has reinstated Palaniappan Chidambaram, a veteran reformer, as his new finance minister and hired Raghuram Rajan of the University of Chicago's Booth School of Business as his economic adviser. Intellectually, this triumvirate is convinced of the need for fiscal discipline, investment in crumbling infrastructure and renewed economic reform -- and investors know it. They know, too, that turning those ideas into action is the problem.

India's leaders solved it once, and must solve it again. The first step is for Singh to pick a fight he can win, and use it to announce a new phase of reform. Letting foreign investors enter retailing is the perfect place to start. The government's retreat on the issue signaled weakness; that message needs to be reversed. The economic case in favor is strong and, crucially, can be cast in populist terms: A more competitive retail sector would drive down prices of food and other goods, so the policy is pro-poor.

It won't be an easy fight, but settling for paralysis could unwind the achievements of the past 20 years. Avoiding that tragedy is worth a few risks.