Less than a week after he assumed office, Union finance minister P. Chidambaram has said what investors and markets have wanted to hear for a while.
The three key issues that he highlighted were better coordination between the monetary and fiscal policies, a return to fiscal consolidation, and clarity in tax laws and a “non-adversarial” tax regime in the country.
None of the three require elaboration: India’s monetary and fiscal policy mix turned sour quite a while ago. Fiscal consolidation has been a dead letter for many years now, and the tax administration had begun resembling the front paw of a leviathan—investors and individuals acquired a fear of tax inspectors. The economy caught a chill.
The problem is that Chidambaram has to move fast in the direction that he has indicated and there’s plenty of doubt—rightfully so—on the political mix needed to do what he wants to.