Jaitley to Gowda: The economic challenges that Modi’s new ministers face

It's finally official. Narendra Modi and a new cabinet of ministers have been sworn in and with it they inherit the challenge of reviving an economy that is growing slowest in a decade and curbing inflation which has been at elevated levels for the last three years or more. Given the importance the economic revival had in the election discourse, the NDA's victory is undoubtedly is the mandate to turnaround everything that went wrong during the UPA regime. And that is not an easy one. Here we take a look at the various ministers, their portfolios and the challenges they face.

The finance ministry is the most important portfolio. The first task at hand for Arun Jaitley, who is in charge of the ministry along with defence and corporate affairs, will be to clean up the mess his predecessor has left. According to various media reports, Jaitley is likely to get Rs 1 lakh crore in unpaid bills, mostly related to various subsidies.

Settling these bills and kick starting the government spending, which Chidambaram curbed in his bid to cut fiscal deficit, are likely to put a strain on the country’s fiscal health. The current account deficit is likely to bounce back as the curbs on gold import are gradually lifted. In short, the twin deficits, which have come under control for now, are likely to rear their heads in the near future. The markets are desperately waiting for the budget to see what the new minister has got up his sleeve.

The environment ministry is another important one. The policy paralysis that marked the UPA’s second tenure was mostly attributed to the ministry’s policy flip-flops and slow clearances accorded to various projects.

However, an aggressive push to clear the projects is also likely to result in confrontations with the project affected people. The key to an amicable resolution could be a sensible rehabilitation and resettlement policy and land acquisition law. The question is will Prakash Javadekar be able to finely balance sustenance and industrialisation.

In the backdrop of the spiralling food inflation, agriculture minister Radha Mohan Singh has the unenviable task of increasing food production while ensuring a fair remuneration for farmers. In his speeches, Modi had promised that he would increase farmers' income by fixing the minimum support price for crops by adding 50 percent profit to their input costs. Many experts have already pointed out that this formula is likely to put upward pressure on inflation.

In order to give farmers a fair price for their produce, Singh will also have to curb the menace of the middle men and brokers. He will also have to take steps to ensure movement of agricultural produce seamlessly across states.

The petroleum and natural gas ministry has been a political hot potato. Each and every action of Dharmendra Pradhan will be closely watched and scrutinised. Will he increase the KG-D6 gas prices? If so, will that be with retrospective effect? How is he going to cut fuel subsidies? Will he increase or decrease the number of subsidised LPG cylinders for households? The decisions on these issues have a bearing on the fiscal health of the economy. These issues will ensure that Pradhan remains on edge as decisions on these issues can render him hugely unpopular, either among economists or the middle class.

As the minister in charge of road transport, highways and shipping, it is Nitin Gadkari's responsibility to improve the country's creaky infrastructure. Everybody--from big corporates to the common man--is yearning for a change. Kick starting investment in the sector is key to creating jobs and will also solve the many ills of the economy. The BJP's manifesto has put special emphasis on this. For the party to keep its promise, serious policy initiatives have to be taken. There are high expectations from Gadkari, who is credited with changing the face of Mumbai, the country’s financial capital.

Shares of power generation companies and others related to the sector have run up after the election results. There are expectations that the power sector reforms introduced by Modi in Gujarat will be replicated across the country. Unhindered power supply is one of the prerequisites for industrial growth and development.

In April 2014, India's demand for electricity stood at 140,998 MW and supply at 133,442MW, resulting in a deficit of 5.4 percent. The capacity addition target for hydro power in the 12th plan (2012-17) is 10,897 MW. Of this, only 1,559 MW has been achieved so far. Piyush Goyal, as the minister who holds this key portfolio, will have to ensure that the financially imprudent, but politically advantageous, gestures like free electricity are balanced while reforming the sector.

The commerce ministry is also seeking to make Indian industries more competitive. Among the complaints from the ministry include uncertain taxation policies with regard to SEZs, harsh labour laws and failure to improve export competitiveness. Not an easy wishlist to fulfil, but Nirmala Sitharaman, who holds the independent charge of this ministry, will have little room for failure with the prime minister looking over her shoulder.

Narendra Singh Tomar, in charge of mines, steel, labour and employment,has one of the tallest tasks to fulfil. Mining has remained a contentious issue ever since policy indecisions resulted in an increase in large-scale illegal mining across the country. The Supreme Court ban on mining in Odisha, which was imposed on the day election results were announced, is a grim reminder for the new dispensation about the mess the sector is in. Labour, the other portfolio that Tomar holds, is also a sector that is desperately awaiting reforms. Amending labour laws has been a long-standing demand of the industry. The rising militancy among labour unions in sectors like auto has only increased the clamour for reforms. Will Tomar bite the bullet? If he does, it will definitely have to be a fine balancing act.

Railways is another key portfolio. The BJP manifesto has promised to establish a diamond quadrilateral of bullet trains. But such fancy projects can wait. First, D.V. Sadananda Gowda should look at the weak finances of the lifeline of the country. Apart from carrying passengers, it has an important role to play in the transportation of coal.

What has been a big concern is the fact that the organisation is facing a shortage of wagons. Indian Railways did not order wagons in 2012-13 and its January 2012 order was grossly inadequate – just 15,800. Ideally, the railways should be ordering about 20,000-22,000 wagons annually. So, there is a wagon tragedy in the making and it is serious. Placing order for more rakes will also boost the manufacturing sector but for that the railways need more financial muscle. It may be a small relief that the UPA, on its way out, raised passenger fares and freight rates. Still Gowda will have to take some more hard decisions to put the house in order.