ANALYSTS' VIEW: India finmin shifts to home min, PM takes over

NEW DELHI (Reuters) - Indian Finance Minister Palaniappan Chidambaram will be India's new home minister and Prime Minister Manmohan Singh will take over the finance portfolio for now, the government said on Sunday.

The move comes after Home Minister Shivraj Patil resigned following the attacks in India's financial capital, Mumbai, which left nearly 200 people dead.

COMMENTARY:

A. PRASANNA, ANALYST, ICICI SECURITIES, MUMBAI:

"I don't know whether it will be such a big change because of late anyway the prime minister has been taking a hands-on approach to economy ever since the G20 summit.

"Whatever the steps the government has been taking in response to the global crisis, it has been a combination of finance ministry, Planning Commission and the Prime Minister's Office.

"Anyway, at this point of time the government's energy is going to be focused on internal security. That's the priority. If you are going to look at a new anti-terror law, new federal investigative agency, those are big policy issues. In some respect one can assume that the economic policies will take a backseat.

"Whatever has happened over the last few days is pretty serious. The first priority has to be that.

"I think the market will take a more big picture view and it is a positive development only. Nobody needs to second guess the PM's credentials, in his ability to run the ministry."

ARVIND SAMPATH, HEAD OF BOND TRADING, STANDARD CHARTERED BANK, MUMBAI:

"The market continues to anticipate rate changes especially after China and some sort of loss of business confidence. We are expecting the 10-year bond yield to trade in a 7.07-7.12 range."

MAHESH RANGARAJAN, POLITICAL ANALYST, NEW DELHI:

"Manmohan Singh is not only the architect of reforms but seen as someone who can who can listen. There are serious concerns on the economy and the big challenge is going to be rebuilding confidence of investors, and there is a greater confidence in Singh because of his midas touch."

ABHEEK BARUA, CHIEF ECONOMIST, HDFC BANK, NEW DELHI:

"I think the primary concern at the policy level remains a slowing economy. I think the finance ministry and the associated agencies like the Planning Commission were in the process of putting a blueprint for a revival.

"My sense is whoever takes over the finance ministry will make sure that the process goes on seamlessly and there is continuity in the way policy is carried out. If it goes to the PMO (it) is guaranteed. Even if someone else comes as the finance minister, I am sure the agenda is to ensure continuity and ensure that the market does not get spooked in anyway."

INDRANIL PAN, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI:

"All economic issues will be now on the backburner. Till now you were looking at inflation, economic growth so far as the vote bank was concerned. Now only one issue will be most crucial.

"Anyway, we have just a month more to go before the government goes into a caretaker mode (before elections).

"Honestly it wouldn't make too much of a difference because the whole attention has shifted to something that is totally non-economic. Very few would be bothered about anything more than national security."

UNUPOM KAUSIK, CHIEF BUSINESS OFFICER, NATIONAL COMMODITY & DERIVATIVES EXCHANGE LTD (NCDEX):

"I don't think this changing of guard can change things at the macro level.

"Because the PM is subject to a lot of responsibility, so I am actually worried that the change of guard should not result in slowing down of focus.

"Right now the need of the time is stability in currency markets, stability in the environment that will facilitate and encourage the capital coming into the country. Right now the country needs money. The present requirement is to further liberalize the environment in such a fashion so as to encourage long-term capital coming into this country.

"After what we have seen in Mumbai the first and foremost need is for efforts to create a more stable environment."

ARUN KEJRIWAL, STRATEGIST AT RESEARCH FIRM KRIS:

"Markets will rejoice the FM going out -- he's made a mess of the economy. People will accept that the government has removed two non-performers and this can positively influence the markets tomorrow."

DEVEN CHOKSEY, CHIEF EXECUTIVE OF BROKERAGE KR CHOKSEY:

"Markets wouldn't be too much enthused by these moves at this moment because removing the finance minister is too late in the day. He has failed in giving proper stability to the economy.

"But probably markets should open in the positive."

MARKETS:

- The rupee ended at 50.09/12 per dollar, 1.2 percent weaker than 49.48/50 at close on Wednesday. It hit a record low of 50.60 earlier in November.

Markets were closed on Thursday due to the attacks in Mumbai.

- The 30-share benchmark index ended up 0.7 percent on Friday at 9,092.72 points. - The benchmark 10-year bond yield closed down 2 basis points at 7.07 percent on Friday from Wednesday's close.

BACKGROUND:

- India's economy has slowed from 9 percent annual growth in the 2007/08 fiscal year. It grew at an annual 7.6 percent in the September quarter this year, its slowest pace in nearly four years and down from 7.9 percent in the June quarter.

- The central bank forecasts the economy is likely to grow 7.5-8 percent in the fiscal year to March but private analysts forecast the pace closer to 7 percent.

- The central bank has slashed its key lending rate by 150 basis points to 7.5 percent since the global financial crisis spilled into India's money markets and hit liquidity in October.

- It has also lowered banks' cash reserve requirements and taken a series of other steps to keep funds circulating in the system.

- Analysts say don't rule out further interest rate cuts to bolster sentiment hit by the bloody attacks on Mumbai, especially as inflation, which neared 13 percent in August, had receded to an annual 8.84 percent by mid-November.

(Reporting by V. Ramakrishnan; Editing by Mark Williams)