New Delhi: Arun Jaitley, a senior leader in Narendra Modi’s Bharatiya Janata Party (BJP), is the frontrunner to be India’s next finance minister even though he failed to win a seat in the lower house, according to two senior party leaders.

Jaitley’s chances of getting the finance portfolio haven’t been diminished because of his election loss and incoming leader Modi is keen to nominate him, according to the leaders, who asked not to be identified because the discussions are private. Other candidates under consideration include former Cabinet member Arun Shourie and ex-central bank governor Bimal Jalan, they said.

Jaitley wasn’t immediately available for comment, according to an aide. Jalan and Shourie didn’t answer calls to their mobile phones.

India’s next finance minister will face economic growth lingering near a decade low as the central bank keeps interest rates elevated to battle Asia’s second-fastest inflation. Stocks and the rupee jumped last week after Modi’s BJP won the biggest mandate in 30 years on a campaign to revive Asia’s third-biggest economy with investment in labour-intensive manufacturing.

“This is a defining election for India because it was won solely on the promise of running the economy," said Sam Gupta, chief executive officer at Grand Trunk Capital Management, an asset manager focused on South Asia. The first thing they need to do is build a stable regime of policies that includes taxation, foreign investment policies which makes it easy for people to predict the direction of government policy.

Modi government

Modi returned to New Delhi on the night of 17 May, after a victory parade in Varanasi, one of Hinduism’s holiest cities, and on Sunday held meetings with BJP leaders in the capital to discuss the formation of a Cabinet. Party lawmakers will formally elect Modi as their leader on Tuesday, allowing him to form a government.

Jaitley, a 61-year-old former trade minister who was running a campaign for the first time, lost to the Congress party’s candidate in his constituency in Punjab. His membership in the upper house of parliament still makes him eligible for a Cabinet post.

What the party wants to do with me is the prerogative of the party, Jaitley told CNN-IBN on 17 May, brushing off a question about whether he’d be offered a Cabinet post.

RSS influence

Born into a family that migrated to India from Pakistan after the nations were separated in 1947, Jaitley headed his university’s student union while studying to be a lawyer and was a leader of the youth wing of the Rashtriya Swayamsevak Sangh (RSS), a Hindu nationalist group and the BJP’s ideological parent.

A lawyer in India’s top court, Jaitley’s history with the RSS makes him a favorite for the finance minister post, while the organization doesn’t support Shourie or Jalan for the job, according to the two BJP leaders, one of whom is a member of the parliamentary board, the party’s top decision-making body. The top four ministries—finance, defense, home and foreign affairs—will go to senior BJP leaders, they said.

The BJP’s majority win puts Modi in a position to pass economic measures, including the passage of a goods and services tax, increasing of food supplies to curb inflation and implementation of stalled projects. If Modi pursues the anti- corruption policies he’s promised, India has the potential to grow about 10% annually for the next 20 years, according to Jim O’Neill, former chairman of Goldman Sachs Asset Management who writes for Bloomberg View.

‘Massive positive’

This is the most positive development in India in 30 years, O’Neill, who coined the acronym Bric, referring to Brazil, India, Russia and China, said at the SkyBridge Alternatives Conference in Las Vegas on 16 May. Modi’s victory is a massive, massive positive for the nation, he said.

India’s economic growth will accelerate to 5.4% in the fiscal year ending 31 March, from 4.4% in the previous 12 months, the International Monetary Fund (IMF) predicted last month. The government estimates that India’s gross domestic product grew 4.9% in the 12 months ended 31 March, near the previous year’s 4.5%, the slowest in a decade.

Economic expansion in Russia, embroiled in tensions with neighbouring Ukraine, will stay unchanged at 1.3% this year compared with the past 12 months, according to the IMF. China’s will slow to 7.5% from 7.7%, while Brazil’s will ease to 1.8% from 2.3%, it said.

Jaitley’s failure in his first attempt to win a seat in parliament mirrors the experience of Prime Minister Manmohan Singh, who lost in his South Delhi constituency in the 1999 election. Since then, Singh has remained a member of parliament’s upper house even as he served as the country’s prime minister for a decade.

Interest rates

In an interview last month, Jaitley said his biggest challenge will be to lower borrowing costs and attract foreign companies to invest and boost the economy. India can’t afford high interest rates, which lead to sluggish growth and make the economy uncompetitive, he said.

Central bank governor Raghuram Rajan has raised the benchmark repurchase rate 75 basis points since September to 8%. He left the rate unchanged on 1 April, and said further tightening isn’t anticipated if consumer-price gains stay on path to hit 8 percent in January 2015 and 6% a year later. The index rose 8.59% in April, official data show.

“We are now seeing a lot of interest and people are not allocated to India," said Gupta. “If India can gets its act together, then hundreds of billions can come to develop the country." Bloomberg