Business Standard

Narrative in mkts will be about economic policies, say analysts as Sitharaman takes charge as FM


Press Trust of India New Delhi
As ambiguity over finance minister portfolio ended with Nirmala Sitharaman at the helm, analysts Friday said that now narrative in markets will be about economic policies that will be adopted to revive and stimulate the slowing economy.
They further said that simplification of GST and measures to revive consumption will be among key tasks to be addressed by the new government.
Sitharaman Friday created history again when she became the first full-time woman Finance Minister of India, and now will have to steer the country out of an imminent economic slowdown and address challenges like job creation, mounting bad loans and stimulating investment.
"The ambiguity of portfolio allocation is now removed, so this is good for the market in a sense. We will get to see new finance minister Nirmala's proposals and approach in the budget due in about a month," said Jagannadham Thunuguntla, Sr VP and Head of Research (Wealth), Centrum Broking Limited.
"Emergence of clarity is what was important, and now narrative in markets will be about the economic policies that will be adopted to revive and stimulate the slowing economy," he said.
Sitharaman joins the finance ministry at a time when the economy is facing challenges of slowing growth, dipping exports and mounting non-performing loans.
"This allocation has come as a surprise, but I would say Nirmala has done a fairly good job as defence minister and she has proved her acumen. She has worked under the finance ministry as MoS, has domain knowledge as she has economics post graduate and has also worked in the sector, so all the main boxes are ticked," said Garima Kapoor, Economist, Elara Capital.
Sitharaman in the Modi 1.0 government became the first full-time woman Defence Minister and in the second term she is now the first full-time woman Finance Minister.
"Simplification of GST, measures to revive consumption, recapitalisation of PSU Banks and addressing the dislocation in financial sector esp NBFCs remains key tasks to address," Kapoor added.
"Sitharaman is eminently qualified to steer India's economy which is facing multiple headwinds of slowing consumption impulses, moribund private capex cycle and anemic exports," said Ajay Bodke, CEO PMS, Prabhudas Lilladher.
Unprecedented squeeze in liquidity due to crisis in NBFC sector and consequent spike in risk aversion has severely impacted aggregate demand he said adding that sectors such as real estate, automobiles, consumer goods etc need an immediate respite.
"With limited fiscal maneuverability it remains to be seen how she can inject a strong dose of fiscal stimulus to revive animal spirits," Bodke added.
Romesh Tiwari, Head of Research, CapitalAim said, "Nirmala Sitharaman as the new finance minister is the right choice given her academic background in economics. She will have to face challenges of slowdown in domestic consumption and liquidity issues."

Sitharaman is an alumnus of Jawaharlal Nehru University and London School of Economics.

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First Published: May 31 2019 | 6:30 PM IST

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