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Analysts welcome PM Modi's faith in Sitharaman as finance minister

Some analysts see spending on infrastructure, which soared under Sitharaman, to remain a big focus of the government

Nirmala Sitharaman

Image: Bloomberg


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By Abhishek Vishnoi and Chiranjivi Chakraborty

Indian Prime Minister Narendra Modi’s decision to reappoint Nirmala Sitharaman as the country’s finance minister is being seen by market analysts as a strong signal of policy continuity.
Modi’s new cabinet has seen the return of several old faces from his earlier administration. For Sitharaman, one key challenge will be to balance fiscal demands in a coalition government after the ruling Bharatiya Janata Party failed to win a majority in the elections.

Some analysts see spending on infrastructure, which soared under Sitharaman, to remain a big focus of the government along with ensuring that the South Asian nation sticks with its conservatism on fiscal deficit. 

Here are some comments from market participants on India’s key ministerial allocations:

Goldman Sachs Group Inc.

  • Modi’s new coalition government kept leadership positions unchanged in most of the key ministries, which bodes well for continuity of reforms
  • “We expect the new government to stick to the fiscal consolidation path with a continued thrust on infrastructure creation through more rail network, amidst a slight tilt towards more rural spending,” Goldman Sachs economists including Santanu Sengupta wrote in a note
  • Modi’s party kept 25 out of 30 cabinet appointments while leaving five cabinet seats for coalition partners, Goldman said
Nomura Holdings Inc. 

  • “Investors were very fearful of the compromises the BJP would have to make” after being forced to form a coalition government,” Sonal Varma, an economist at Nomura Holdings said
  • With Sitharaman’s reappointment, the focus on infra and continued fiscal consolidation should also continue
  • While Andhra Pradesh and Bihar may get financial support, this will probably be done “without compromising on fiscal consolidation”, Varma said

DRChoksey FinServ

  • Nirmala Sitharaman’s reappointment as India’s finance minister in the new coalition government is “definitely a wise step” for keeping the focus on infrastructure development and exports, says Deven Choksey, managing director at DRChoksey FinServ Pvt.
  • “She has done a good job of focusing on priorities and has the clarity on what needs to be done,” he said
Target Investing

  • With fiscal discipline a focus for the next two budgets, it was important that there was continuity in the finance ministry, said Sameer Kalra, founder at Target Investing. “Markets would react with some level of positivity on it,” he said
  • “Given rating agencies have turned positive in their outlook, there is a possibility of a rating change in next 24 months”
Barclays PLC

  • “With most ministries, including the top four, unchanged, we expect policy continuity from the new government,” Shreya Sodhani, vice president for global research, wrote in a note
  • Sodhani said that investor focus will now move to the budget in July where she sees the fiscal deficit target for the financial year ending March retained at 5.1 per cent

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First Published: Jun 11 2024 | 9:49 AM IST

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