GST done, Modi has many more mountains to climb

Big Bang! That’s what everyone who is someone with a nodding knowledge of economics had been asking Prime Minister Narendra Modi to ignite over the past two years. Modi’s Finance Minister Arun Jaitley had steadfastly held on to the idea that there is no such thing in financial management, that the ‘big bang’ leitmotif is just a creation of some excited headline writer.
But last Wednesday changed all that. The Goods and Services Tax (Amendment) Bill (GST) received near-unanimous backing in the Rajya Sabha and, barring something calamitous, April 1, 2017 will be the day when it will become law after going through a rigorous ratification process in at least 50% of the states.
If anything that can be described as ‘big bang’ in a nation’s legislative reformation, this is it.
Perhaps the only parallel in the Indian context is the 1991 economic liberalisation initiated by then prime minister P V Narasimha Rao and his finance minister Manmohan Singh. (This is not to forget the 1969 bank nationalisation by the government of Indira Gandhi, but opinion is overwhelmingly in favour of viewing it as a retrograde step.)
It is ironical that when Europe, thanks to ‘Brexit’, is squarely staring at the possibility of an end to the common market idea, India should enter that stage.
For, what the bill proposes to effect through the GST is to free up trade between its various states and make the entire country a single common market.
All the benefits that accrue to such a joint effort—creation of thousands, if not millions, of new jobs, free and fast movement of goods through the length and breadth of this vast country and dismantling of fiscal barriers thereby eliminating corruption at several levels—will eventually make India a far better place to do business in, both for the indigenous entrepreneur and the foreign investor.
The GST had been 11 years in the making and more than economics politics had played spoilsport at every juncture when its passage in the two houses of parliament had seemed a possibility.
The two mainstream national parties—the Bharatiya Janata Party (BJP) and the Congress—were equally responsible for the impasse over the years and, for good measure, these very same parties can now take credit for its passing, a fact that Modi underlined in his tweet by describing the GST “as the best example of co-operative federalism”.But Modi could have got this done even in the first year of his rule.
But either because he was consumed by his own rhetoric of a “Congress-free India” or because the mutual animosity between the leaders of the two top parties did not allow any leeway for seeking common ground, this most crucial legislation got kicked around like two football teams playing for time.
As far as we know there had been just one single official meeting between Modi and Congress chief Sonia Gandhi and former Prime Minister Manmohan Singh on finding ways to solve the GST impasse.
In more mature democracies, leaders of the ruling and opposition parties meet very often to thrash out differences so that valuable debating time in parliament is not lost.
As with other countries, India too witnesses backchannel work away from media glare but sometimes keeping the media in the loop by openly meeting the opposition a little more than half way would do wonders in governance.
It may even seem like “ego-massaging”, but what harm can it do if it delivers for the greater common good? If anything, Modi must view these GST negotiations as a learning curve on governance.
“This is not the victory of any party but of the highest standards of Indian democracy,” Modi said in the Lok Sabha.
If Modi can show this sort of magnanimity in victory, things could move much faster for the country. Of course there are many more mountains to climb before the GST can be a reality.
Issues like the mechanism of dispute redressal, both between the states and the centre and among the states themselves, the contentious question of what the proper standard rate of GST would be and how it can be made tamper-proof are all going to produce much heat in the weeks and months to come.
Modi and his trusted lieutenants will have to be at their tactical best to climb these mountains and put in place a tax regime that is acceptable to most, if not all.
At one time Modi had even toyed with the idea of calling a combined session of parliament to make sure that the GST Bill is passed because of the huge majority he enjoys in the lower house.
Commentators had condemned the idea forthwith.
Better sense seems to have prevailed within the ruling party as it decided to get as many on board as possible.
Except for the Congress Party, most of the Left parties (Kerala Chief Minister Pinarayi Vijayan exempted) and Tamil Nadu’s All-India Anna Dravida Munnetra Kazhagam, everyone expressed solidarity with the government.
The Congress realised ploughing a lonely furrow would only alienate it further from the people and, therefore, came on board at the last minute after the government conceded to some of its arguments.
All this is now water under the bridge.
The GST, together with the bills on bankruptcy code and real estate regulations, is till date Modi’s biggest achievement on the legislative front. It will take at least a couple of years to show the results, but results will be there and positive ones too.
That said, there are some equally important legislative proposals that are awaiting clearance by the Rayja Sabha.
Most of the labour laws that India presently have need urgent amendments. But organised labour has been a major dampener for developmental programmes around which Modi is hoping to build India’s future.
The mind-set continues to be negative, mostly on the part of trade unions, and this has led to cross-country shutdowns and strikes.
Land acquisition by the governments, both at the centre and in the states, has been another sore point on which Modi has had severe problems.
If you have no land to build on and if you do not have the labour to build them, progress and development will remain on paper only, GST or no GST.
While land is an emotional issue for most Indians, political parties, especially those from the Left, make any negotiation on labour difficult because it is the poverty of the labour class that keeps these parties relevant.
The GST is only one cog, albeit a significant one, in nation building which is always a work in progress.
But for the moment Modi can feel satisfied that he has crossed the most crucial economic milestone that his predecessor and economics wizard Manmohan Singh could not.