It remains to be seen how much power will remain with Mr Putin
Vladimir Putin has promised to rein in inflation and boost social spending in his new job as Russia's prime minister.
In a speech to parliament before being voted into the position, Mr Putin said he wanted to make the country a world economic leader by 2020.
Mr Putin told the Duma he would strive for "single-digit inflation within a few years", but on this economists said he would have his work cut out.
Russia's annual inflation rate hit 14.3% last month.
With Russia continuing to enjoy an economic boom led by its oil and gas exports, Mr Putin says it will overtake the UK in terms of gross domestic product (GDP) this year.
The UK currently has the world's sixth highest GDP, with Russia one place behind.
Mr Putin also pledged to cut taxes.
"Lightening the tax burden will be a significant stimulus for the country's business climate," he said.
"I believe that we need to decide on the strategy and tactics of further tax cuts no later than by August."
Western economists say the main economic challenge for Mr Putin - who was president for eight years - is to successfully spread the wealth created by Russia's energy exports more evenly.
It is unclear whether Mr Putin will change tack regarding foreign investment in the country.
During his presidency, many in the West accused him of driving out foreign firms in the oil and gas industries in order to regain the state control lost under his predecessor, Boris Yeltsin.
Western commmentators say it is uncertain how much power Mr Putin will actually hand over to his successor as president, Dmitry Medvedev.