By Niraj Patel

India's new cabinet faces immediate pressure due to power outages and economic sluggishness. Source: Melissa Emmon's Photography's flickr photostream used under a creative commons license.

Just over a month ago Pranab Mukherjee resigned from his post as Finance Minister in order to wage a successful campaign for the Presidency of India.  To fill the void left by Mr. Mukherjee’s departure on June 27, Prime Minister Singh assumed the role of the Finance Minister in the interim, playing double-duty until a new minister could be appointed.

This dual responsibility came to an end when on July 31 Singh made three critical appointments.  First he appointed Mr. Palaniappan Chidambaram as the new Finance Minister, a post that he has held twice before. Chidambaran vacated his former position as Home Minister to assume the finance portfolio. Dr. Singh chose Sushil Kumar Shinde to fill the new vacancy at the Home Minister position. Mr. Shinde, previously the Power Minister, was succeeded by Corporate Affairs Minister, Veerappa Moily.

This cabinet reshuffle comes at a critical juncture as India grapples with economic uncertainty and sluggishness.  Chidambaram assumes the finance portfolio as India’s economy is threatened by a slumping rupee, record deficits, a potential credit-rating downgrade to junk status, and a weak monsoon. Many have hoped that Mukherjee’s successor at finance would break the policy logjam and usher in an era of much-needed second-generation economic reforms.

Mr. Shinde’s elevation from Power to Home Minister on Tuesday July 31 comes at an inopportune time, on the very day when India experienced a second power outage in as many days, leaving close to 680 million without power, the largest power outage in history.  The timing of Mr. Shinde’s promotion to Home Minister has left some questioning whether the central government truly appreciates the gravity of power sector reforms needed for its growing economy.

Chidambaram seems like the natural choice for Finance Minister given his previous tenures from 1996-1998 and 2004-2008.  He has a reputation of being a “doer” that makes him appealing to foreign investors, but faces a large task ahead to turn around India’s economic prospects as well as those of the Congress party in the run-up to 2014 elections.  Shinde will have his hands full as Home Minister, with a volatile battle front against the Naxalites (Maoists) and negotiations with the Opposition and Chief Ministers about creating the National Counter Terrorism Center.  Moily assumed the Power Minister role in the wake of two massive blackouts.  It is likely that this national embarrassment for a country that desires to be considered a world power will put Moily under the spotlight to push reforms addressing India’s woeful power generation and distribution infrastructure.

Mr. Niraj Patel is a research intern with the Wadhwani Chair in U.S.-India Policy Studies at CSIS.