India names party veteran Mukherjee to steer economy

By Surojit Gupta

NEW DELHI (Reuters) - India on Saturday named veteran Congress party leader Pranab Mukherjee to head the key finance ministry at a time when Asia's third-largest economy has been hit harder than expected by the global recession.

S.M. Krishna, another party stalwart was chosen as the foreign minister by Prime Minister Manmohan Singh to lead India's diplomatic push in a volatile region overshadowed by instability in Pakistan and Afghanistan.

Mukherjee, 73, is a veteran Congress leader and has held several key posts in earlier governments. He was the foreign minister and acting finance minister in the previous Manmohan Singh-led government, and is seen as a safe pair of hands.

A sign of his priorities was seen in February when Mukherjee said spending may have to jump later this year to shield the economy from a global slump and stem job losses.

Singh was sworn in on Friday for a second five-year term after a general election with expectations his strengthened left-of-centre coalition could both reform a slowing economy and help millions of poor.

The Congress party-led coalition has a stronger parliamentary majority than the previous administration, meaning the government could last its full five-year term and focus on policy issues without the pressures of a fragile coalition.

The coalition planned to present and win parliament approval for the federal budget for 2009/10 by the end of July, a government minister said after the first meeting of the cabinet.

Unfettered by its former leftist allies, Congress is likely to push reforms such as raising the foreign investment limit in insurance and opening up the pension sector to spur growth in Asia's third-largest economy.