Budget 2019: The toughest balancing act for India's new finance minister

India’s first female finance minister in almost five decades, Nirmala Sitharaman, has held a wide range of jobs: She rode aboard a fighter jet as defense minister. As head of the trade department she grappled with falling exports. She’s been a national spokeswoman for her party, and in younger days worked in London as a home decor saleswoman.

Now Sitharaman, 59, faces what might become one of the toughest balancing acts of her career. On May 31, within hours of her arrival at her new office in New Delhi, she was greeted with India’s worst economic news of the year: Unemployment had touched a 45-year high, and India had lost its tag of the world’s fastest-growing major economy to China in the last quarter of the fiscal year.

On July 5, Sitharaman makes her first major public appearance in her new role, presenting India’s budget at a time when she’s under pressure to spend more to reinvigorate the economy. She must find resources for welfare programs announced by Prime Minister Narendra Modi’s government, including 870 billion rupees ($12.6 billion) for a new measure to support farmers. And she must do all that while keeping the national deficit below 3.4% of GDP, a target credit rating companies are watching closely.

A surprise pick by Modi, the new minister remains a relatively unknown entity to the financial world. Her critics say there’s a risk she could simply become a figurehead, with polices shaped by the prime minister. Her supporters argue that her reputation for prudence and team spirit will help her work out a middle ground.

“It is difficult to predict what Minister Sitharaman will do in her new role as finance minister,” said Richard Rossow, senior adviser at the Center for Strategic and International Studies in Washington. “She will need to balance fiscal prudence with Modi’s desire to continue expanding key social programs like subsidized cooking gas and electric power access.”

The minister didn’t respond to an email requesting an interview, and a call to her office wasn’t answered.

Economic growth is high on the agenda and the government is undertaking various reforms to achieve this, Sitharaman told lawmakers on Tuesday.

London Move

Born in the ancient city of Madurai in southern state of Tamil Nadu, Sitharaman went on to get a master’s degree in economics at India’s prestigious Jawaharlal Nehru University. She met her husband on campus and later moved with him to London. There she worked as a salesperson at a home decor store on Regent Street, logging record Christmas sales one year, according to the Business Standard newspaper.

Sitharaman went on to become a research manager for audit firm PricewaterhouseCoopers in London, before returning to India in the early 1990s and joining the Bharatiya Janata Party in 2008. She held a string of increasingly important roles inside the party and government, and has been viewed as a trusted associate of both Modi and Arun Jaitley, her predecessor as finance minister.

Jaitley, her political mentor, opted not to take a new cabinet position due to ill health. Sitharaman’s loyalty to him was on display on her first day in office: She recalled Jaitley’s tenure and was initially slightly hesitant to take the chair Jaitley sat in, according to officials who were present.

In her last position as defense minister, she showed a dislike for fiscal wastage and inefficiency, spending her full budget to modernize the armed forces. That was a departure from the past when procurement delays would leave funds unused.

“There will be emphasis on investment, not on populism. You can expect budgetary discipline to continue,” said K. Subrahmanya, a former associate editor of the Deccan Herald, who studied with Sitharaman at university. “She’s not extravagant,” he said, describing her as a cautious spender in her student days.

Free Trade

Still, Sitharaman’s role as commerce and industry minister from May 2014 to September 2017 drew some criticism as exports dwindled amid global economic pressures, and India wasn’t able to conclude talks on free trade agreements.

As finance minister, Sitharaman will need to fight perceptions that Modi is pulling the strings. A recent example, in which Sitharaman met some economists for a pre-budget meeting in June, only for Modi to call another meeting with them a week later, presents some worrying signs, according to Mohan Guruswamy, a former finance ministry official.

“Modi just wants a constitutional figurehead,” said Guruswamy, who is now chairman of the Centre for Policy Alternatives, a think-tank in New Delhi. “I don’t see them doing anything radical to reform the economy to get a grip on subsidies, expenses.”

Annual Ritual

Outside of work, the minister has shown a love of tradition, tweeting about following annual family rituals of making pickles. Lekha Chakraborty, a professor with the National Institute of Public Finance and Policy in New Delhi recalls that Sitharaman in an earlier role as a member of the National Commission for Women approached her directly for input on inclusive economic policies for women. She was struck by the incident because Sitharaman outranked her substantially at the time.

She’s considered a good-listener who tries to be inclusive, qualities that could help her push laws in Parliament, bring states on board for tax changes, and address some of the complexities of the Indian economy.

Since her appointment, Sitharaman has clocked long hours at her office daily, often listening to suggestions coming her way, according to finance ministry officials. She asks repeated questions until she has fully understood a subject, they said.

“The international investing community feels India’s rules related to investment and taxation are too complicated,” said A.S. Thiyaga Rajan, a senior managing director in Singapore at Aquarius Investment Advisors Pte. “We are all hoping she will do a good job.”