Ground realities may hurt Chidambaram's agenda

Faced with impatient financial markets and the threat that India's credit rating could be cut to junk, Chidambaram has wasted no time since moving into his old ministry last week.

He has ordered a review of retrospective tax rules that had panicked foreign investors and sidelined officials behind those rules. And, in his first public comments, the Harvard-educated former lawyer vowed to fill a gaping hole in the budget and ease the burden of high interest rates on consumers.

In what is perhaps testament to his nimble media management, newspapers have somehow got wind of new early-morning starts and long hours for officials at the previously laid-back ministry.

During his last stint at finance, Chidambaram oversaw India's fastest growth surge in the past two decades that helped steer the economy through the worst of the global financial crisis. But this time, Chidambaram's task is more daunting.

Industrial output has fallen from year-earlier levels in three out of the last four months, and a summer drought has triggered a slew of cuts in growth forecasts, with economists predicting this year's economic expansion as low as 5.4%, the worst in a decade.

He also inherits the political constraints that stymied his predecessor Pranab Mukherjee's efforts to push major reforms.

Bills that would bring crucial financial-sector reforms were removed from the agenda of the current parliament session because Prime Minister Manmohan Singh failed to win support for them from coalition allies and even some in his own party.

Efforts to allow foreign supermarkets to set up in India have also run into opposition because, although such a step would ease supply-side bottlenecks in an inflation-plagued economy, political parties fear it would cost jobs - and votes.

"Things are easier said than done in India," says Robert Prior-Wandesforde, an economist with Credit Suisse in Singapore, referring to New Delhi's repeated reneging on promises.

"Rather than promising and running the risk of not delivering. I would like to see him delivering, then talking."