On his first day as the newly-appointed Finance Minister, Jaitley told reporters that "we have to restore the pace of growth, contain inflation and obviously concentrate on fiscal consolidation."
Finance is arguably the most crucial portfolio in Modi's new government and analysts are of the view that the 61-year-old has everything that's required to push through important reforms to kick-start the investment cycle in the economy where GDP growth is hovering near sub-5 per cent.
Based on the BJP manifesto and public comments, the government may also announce relief from retrospective taxation. The BJP government has emphasised the need for a stable tax regime, and it may roll back some retrospective decisions requiring corporates to pay additional taxes.
Marginal tax relief for the middle class and tax holidays to incentivise investment in selected sectors are also likely. The BJP manifesto promises to bring black money back into government coffers, prompting expectations of a tax amnesty scheme.
"Being a legal person, he should be able to respect rules and laws of the land & send a positive signal to the international investors," said Nirmal Gangwal, Founder and Managing Directors, Brescon Corporate Advisors, a debt resolution advising company.
"We hope we will not go back on past commitments through retrospective amendment in legal framework like the one seen in the Vodafone case," he added. Gangwal is of the view that current FM (his party being in full majority) should be able to proceed with difficult yet essential reforms like GST, FDI, etc. unlike his predecessors who got derailed due to lack of support from coalition partners as well as their own non-performance.
Going forward, markets will watch closely for policies that can improve the macroeconomic environment as likely changes in the government's decision-making process could have a long-lasting impact on the economy.
"Modi's cabinet formation has clearly shown that he will not be cowed down by the seniors in his party. He has been able to finagle a cabinet which he seems to be comfortable with. Further, certain key aspects of all major ministries have been integrated into the PMO to speed up decision making," said Dr. Vikas Gupta, Eexecutive Vice President, Arthveda Fund Management Pvt Ltd.
Commenting on the next Finance Minister, Gupta said that the way Cabinet is structured means that Modi means business and he doesn't see the market having any issues with Arun Jaitley as the FM.
Jaitlley is also entrusted with the job of Defence Ministry along with Finance. Although the defence ministry seems to be temporary with him as an additional charge till a full-time cabinet minister takes charge.
The move is probably on the similar integration theme as power and coal being integrated where it is important for the production capacities to be aligned.
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