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Arun Jaitley resumed charge at North Block in New Delhi on Thursday after the President reallocated the finance and corporate affairs portfolios to him. Photo: Pradeep Gaur/Mint
Arun Jaitley resumed charge at North Block in New Delhi on Thursday after the President reallocated the finance and corporate affairs portfolios to him. Photo: Pradeep Gaur/Mint

Arun Jaitley returns as finance minister amid worries about weakening rupee

Arun Jaitley is back as finance minister after three months. The Indian rupee weakened past 70 against the dollar earlier this month, raising concerns of the current account deficit widening.

New Delhi: Arun Jaitley on Thursday resumed charge as the finance and corporate affairs minister after a gap of more than three months.

The senior Bharatiya Janata Party (BJP) leader was recuperating from a kidney transplant, which took place in May. Jaitley was undergoing dialysis before the transplant.

Jaitley returns at a time when the government is facing a challenging external environment on account of a weakening currency. The rupee depreciated past 70 against the dollar earlier this month. A weak rupee, along with volatile oil prices, has the potential to exert pressure on the trade deficit and, consequently, on the current account deficit (CAD).

In 2018, the rupee has fallen by more than 9% against the US dollar. It has also weakened the most compared to other Asian currencies. This has led to economists forecasting that the CAD will widen to 2.6-3% of gross domestic product (GDP) in 2018-19, against 1.9% in 2017-18.

Jaitley’s return also comes at a time when the National Democratic Alliance (NDA) government has been forced to defend its track record after a recent draft report of the National Statistical Commission on GDP back series data showed that the performance of the previous Congress-led United Progressive Government (UPA) was much better in terms of growth.

The report, which calculated India’s GDP with 2011-12 as the base year, showed the Indian economy grew over 10% twice in the UPA regime, with the average growth at over 8% in its 10 years in power. In contrast, the average growth in NDA’s four years was at 7.3%.

The growth performance will be one of the major talking points in the run-up to the 2019 polls.

Jaitley will also have to walk a tightrope on fiscal deficit. Tax revenues from goods and services tax (GST) are yet to stabilise with actual collections lagging targets so far.

Besides, the recent rate cuts on many items, effective 27 July, will further impact revenues and probably offset the improvement in collections on account of better compliance.

The disinvestment target of 80,000 crore also looks difficult to achieve with the privatisation of Air India falling through. Expenditure squeeze is also difficult ahead of general elections, threatening the government’s fiscal deficit target of 3.3% of GDP.

The only silver lining were direct tax collections and the unexpected windfall gains from the Walmart-Flipkart deal.

Jaitley resumed charge at North Block on Thursday after the President reallocated the finance and corporate affairs portfolios to him.

The senior leader met secretaries to the government of India, including finance secretary Hasmukh Adhia and financial services secretary Rajiv Kumar, as well as the head of the direct and indirect tax boards. Jaitley is likely to limit his public appearance for the next few weeks because of the risk of infection.

Prime Minister Narendra Modi had temporarily assigned the finance and corporate affairs portfolio to railways and coal minister Piyush Goyal.

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