Indian Prime Minister Narendra Modi's Council of Ministers signals both continuity and change.
The most important changes in the so-called Modi 2.0 Cabinet were the induction of BJP President Amit Shah as Home Minister and the appointment of former Foreign Secretary S. Jaishankar as External Affairs Minister. But from the perspective of foreign investors, the appointments of Nirmala Sitharaman as Finance Minister, Piyush Goyal as Commerce Minister (in addition to his old charge of the Railways Ministry) and Nitin Gadkari as Minister for Small and Medium Enterprises (in addition to the Ministry of Roads & Highways) are probably of greater interest.
With former Finance Minister Arun Jaitley, a confidant of the Prime Minister, opting out of the government on health grounds, it was widely speculated that Goyal, who had presented the Interim Budget in February, would step into his shoes. But the Prime Minister, in keeping with his penchant for springing surprises, instead allocated the finance portfolio to Sitharaman, who was Defence Minister in the previous Modi government.
Sitharaman, who has had a meteoric rise in the party and the government on the back of a solid performance, had held the commerce & industry portfolio before she became Defence Minister. So, she is well aware of the issues plaguing the Indian economy. Then, having worked closely with Jaitley in the past, Sitharaman also helps maintain some degree of continuity and familiarity in this key ministry at a time when the Indian economy is facing a possible slowdown both in investment and consumption growth.
The Union Budget she presented on July 5 has eased tax compliance norms, pushed for greater use of digital payments, assured start-ups that there would be no harassment on the issue of the Angel Tax, provided massive tax concessions for the manufacture and adoption of electric vehicles, announced tax and other incentives for foreign companies to invest in India and, by and large, addressed many of the issues raised by foreign investors.
In the previous Modi government, Gadkari had earned the reputation of someone who could get the job done and his tenure as Roads and Transport Minister won him wholesome praise even from Opposition parties - though sometimes more in political mischief than anything else. But Gadkari's appointment as Minister for Small and Medium Enterprises showcases the importance the Prime Minister attaches to these sectors that form the backbone of any economy. The world over, it is small and medium industries (SMEs) that generate the bulk of the jobs and create linkages with large industries and global supply chains that consume their products.
It also shows that Modi is determined to overcome the gap between jobs and skills that is afflicting the Indian economy (like many other economies) and will pull out all stops to encourage and modernise the SME sector in the country. Goyal, who is credited with turning India's moribund power sector around, and Jaishankar, who is a former Ambassador to the US and China, will be expected to steer India's trade negotiations with the US at a time when US President Donald Trump is decoupling Washington's strategic and trade ties with its allies, including India.
The US expects India to provide market access to all these products on easy terms in return for the restoration of GSP benefits, a clearly untenable argument. Modi has a reputation of following a horses for courses policy and for picking the right horses for the appropriate courses. These above appointments, as well as others such as giving Petroleum Minister Dharmendra Pradhan additional charge of the Steel Ministry, point to careful thought and consideration, especially on ministries dealing with the economy. Almost all of them have drawn up ambitious targets that will be unveiled over the coming days and weeks. Team Modi 2.0 has been selected to ensure delivery on those targets.