The 61-year-old has also been given the important portfolio of defence, making him the most powerful member of Modi's cabinet. Yet, he lost his parliamentary seat in the general election, one of the few blots on an otherwise stunning victory for the Hindu nationalist Bharatiya Janata Party (BJP) that has swept to power with its first-ever parliamentary majority.
Finance is arguably the most crucial portfolio in Modi's new government as it seeks to drag India out of its economic torpor and create enough jobs for the 10 million young people who join the workforce each year. Jaitley was long the front-runner to run the ministry, but the additional charge of the powerful defence portfolio came as a surprise.
"We have to restore back the pace of growth, contain inflation and obviously concentrate on fiscal consolidation," Jaitley told reporters on Monday, signalling on his first day in the job a determination not to allow India to drift.
On the election campaign trail he told Reuters that it would be important to send an early signal that major infrastructure projects tied up in red tape would finally move ahead with "five big clearances, some big-ticket clearances".
Personally close to the intensely private Modi, and commerce minister in the last BJP government more than a decade ago, party sources said Jaitley's place at the high table was never really in doubt, despite the humiliation of losing his seat.
His polish, Western-style education and strong command of English makes him an effective foil to the rough-hewn Modi in articulating the government's position to foreign investors, captains of industry and India's own central bank governor.
A patrician figure who would not be out of place in London's High Court, Jaitley is the son of a successful lawyer. He was educated in an elite New Delhi school and at the prestigious Delhi University, where he was a students union leader in the youth wing of the BJP.
Modi is the son of a tea seller who can captivate a crowd, but avoids speaking English in public.
Jaitley has told Reuters he was formed politically by the experience of being jailed for 19 months in a crackdown by then-prime minister Indira Gandhi of the Congress party. The BJP trounced Congress in the 2014 election.
"It hardened my political convictions, it increased my commitment, it made me rub shoulders with the top national leaders," Jaitley said.
DAMNED WITH FAINT PRAISE
Although he lost his own electoral race, Jaitley's satisfaction in the BJP's overwhelming victory over the Congress's main contender, Rahul Gandhi - Indira's grandson - will have been no less than Modi's.
Rather than gloat, though, Jaitley has damned his vanquished opponents with faint praise. Outgoing Prime Minister Manmohan Singh - for a decade his opposite number in parliament's upper house - was leaving office with "dignity and grace", he wrote recently in his widely read blog.
"Only if he had stood up at the right time ... would (he) have been regarded with still greater honour," Jaitley added, accusing Singh of failing to prevent corruption and arbitrary tax rulings that stifled investment and growth.
Born into a family that migrated to India from Pakistan after the partition of India in 1947, Jaitley headed the Delhi University student union and the student wing of the Rashtriya Swayamsevak Sangh (RSS), the ideological parent of the BJP.
He has represented multinational corporations such as Coca-Cola Co. and PepsiCo Inc. in court. Since 2002, he has emerged as a leading party strategist, scripting several of its victories in state elections.
As minister in charge of trade in the last BJP government, he led India in talks at the World Trade Organization, blocking attempts by developed countries to gain greater access to emerging markets without reducing agricultural subsidies.
ON THE SKIDS
He takes charge of an economy, Asia's third largest, that is battling its longest slowdown since the 1980s. Growth has almost halved to under 5 percent in the past two years - too slow to create enough jobs for aspirational young Indians.
Inflation is meanwhile running dangerously close to 10 percent, way above the central bank's comfort zone.
"I don't want to use any harsh language," the bespectacled Jaitley told a recent news conference in his booming baritone voice, putting his predecessor as finance minister, P. Chidambaram, in the dock.
"But the finance minister inherited 8.5 percent growth, and he is going to leave behind a 4.6 percent growth rate."
Yet, in a heated campaign, Jaitley has been careful to avoid joining the public attacks on the widely respected governor of the Reserve Bank of India, Raghuram Rajan, that have been launched by some of his more populist party colleagues.
Like Jaitley, Rajan spent much of his school and university days in India's capital, although he is a decade younger than the minister. Rajan went on to the University of Chicago and was later chief economist for the International Monetary Fund.
"We don't take a stand on individuals," Jaitley said. "I can only assure you that ... we will be a responsible government taking responsible decisions."
One of Jaitley's first tasks will be to deliver a revised budget that deals with the fiscal fallout of India's slowdown and addresses a deficit that Chidambaram capped by putting off spending.
The ringing endorsement, not only of voters for Modi's pro-growth agenda but also of investors who have piled into Indian stocks, bonds and the rupee, should buy Jaitley time to put the country's public finances in order.
"There is going to be some kind of fiscal slippage in the short term, but it would be positive for the medium term if Jaitley is appointed finance minister," said Himanshu Malik, a strategist at HSBC in Hong Kong.
Arvind Panagariya, an economics professor at New York's Columbia University, who is tipped to get an advisory role in the government, has said the 2014-15 fiscal deficit could be revised up to 4.5 percent of gross domestic product from the 4.1 percent envisaged by Chidambaram.
Backsliding on the deficit is a blinking orange light for sovereign ratings agencies, with Fitch saying that India's debt and deficits were higher than other countries that share its BBB, or investment grade, rating.
But reviving stalled investment and economic growth are the bigger priorities. "The most salient of these issues from a sovereign credit perspective is the need to re-boost the sustainable growth rate," Fitch commented. "This will require an re-acceleration of the investment cycle."