With the GST getting delayed further, the government will try to push it during the budget session

(This is an updated version of an earlier story published by Firstpost)

Parliament’s winter session, which ended today (Wednesday), is a big disappointment and largely a repeat of Monsoon Session in the context of passage of critical reforms Biils such as Goods and Services Tax (GST) Bill, which the country desperately needs to progress on to higher orbits of economic growth.

In all, Lok Sabha passed 13 Bills while Rajya Sabha passed just 9 Bills in the 20-day winter session, but none of these were large-ticket Bills. The Bills which were passed included Negotiable Instruments (Amendment) Bill, the Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Amendment Bill and the Juvenile Justice (Care and Protection of Children) Bill.

"The 237th Session of the Rajya Sabha...seemed singularly unproductive in terms of legislative work," said Rajya Sabha chairman, Hamid Ansari in his valedictory remarks in Parliament. Appealing to the members to introspect the state of affairs of the House, Anasri said the record of the winter Session belied the commitment of the members to a functioning legislature.

Ansari's comments on the poor outcome of the Session also reflects the disappointment of 1.25 billion Indians over a fully washed out Winter session.

The political drama

The Congress-led opposition scripted its part quite well and played with precision. The BJP clearly lacked the political will and strategy to get around the opposition ploy and failed to make progress on the reforms front. Bad politics won over good economics.

What changed from Monsoon to Winter? If Lalit Modi controversy and Vyapam scam washed out the Monsoon Session, the Winter Session was frozen with allegations and counter-allegations on issues ranging from ‘intolerance debate’ to ‘National Herald' allegations to 'Delhi Cricket Association' corruption case.

There were arguments and counter-arguments by both political parties on the merits and demerits of each of these issues. But the fact, at the end of the day, is Parliament’s primary business—policymaking suffered greatly.

And that's the only question really mattered to 1.25 billion Indians, who were waiting to see the progress of their country and see the fruits of economic growth finally reaching their door steps? For them, there aren’t any tangible results.

GST dream

Perhaps, the only major reform both India and the world were looking at from Parliament’s winter session was the passage of Goods and Services Tax (GST) Bill, which promised to bring in the biggest tax-reforms in the country ever happened.

It promised to streamline the tax process, subsuming several different taxes, and thus broaden the tax base in the country, adding up to 1.5 percent to the GDP growth. It remains as a pipe dream and the April 1 roll out announced by the government earlier remains a sure miss.

One good thing is that the government managed to present the Bankruptcy code in Lok Sabha as a money Bill. This makes the passage of the Bill a surety in the Budget session, since Rajya Sabha cannot hold back a money Bill for more than 14-days.

But the fact remains that the failure of GST passage is nothing less than a political failure of BJP. It wouldn’t have been difficult for BJP-cadres to visualize the incoming opposition attack on the GST Bill, since BJP itself had chosen not a very different path when it was in the opposition during the UPA-years.

But, this time the BJP was so close to generating a consensus on the Bill, considering that the three critical demands raised by Congress---capping the 18 percent GST rate in the constitution, doing away with the 1 percent cap on inter-state trade and creation of dispute resolution mechanism—were by no means a herculean task. BJP could have dealt with these with a bit more skillful approach and break the Congress barrier.

What is more important to note that even the proposal made by a panel headed by Chief Economic Advisor (CEA), largely aligned with the Congress demands. The CEA panel has suggested a three-rate structure. A concessional rate of 12 percent for public goods that concerns the deprived or weaker sections, a standard rate of 17-18 percent that would concern majority of items and a rate of 40 percent for luxury items and tobacco, aerated drinks and pan masala etc.

Modi shouldn’t have missed his chance to get the opposition on board in winter session, at any cost, and get the GST done in Parliament as quickly as possible by accepting the CEA-panel recommendations. The BJP clearly knew without the Congress support, it wouldn’t be in a position to get the Bill through in Rajya Sabha, where it is weak in terms of numbers.

An 18 percent standard GST would be ideal to start with since a rate too high would hurt service/ consumer states and too low would do the same to producer states.

GST contentions

There is no major opposition even among Congress-ruled states for the creation of an independent dispute resolution mechanism on GST-roll out. Every expert has discarded the logic of imposing the 1 percent additional levy on inter state –trade since it threatened to kill the very character of GST.

The third inclusion of cap in GST Bill too wasn’t an unbreakable puzzle since, as former finance minister P Chidambaram rightly pointed out, this could have been included in the Bill with some “skillful drafting” so that the government will have the flexibility to tweak the rate at a future rate if it is required.

To be sure, the BJP seemed to begin the session hitting all the right notes with Prime Minister, Narendra Modi, himself taking the lead to initiate discussions with Opposition leaders on key legislations in Parilament including GST. The consensus mantra was echoed by other BJP leaders too to resolve the deadlock. It would have made much more sense for BJP to agree to the three conditions of Congress on GST, especially in the backdrop of CEA panel recommendations. But, it failed to foresee Congress’ backroom political strategy.

What lies ahead

The winter session began with investors and rating agencies raising questions on Modi-government’s ability to push ahead with the reforms agenda in the aftermath of a massive defeat BJP suffered in Bihar polls. With the GST getting delayed further, the government will try to push it during the budget session.

Clearly, the time is running out for Modi to make major reforms happen in the economy. The promised reforms agenda of Narendra-Modi government is yet to take place in a major way. Beyond FDI liberalisation in a few sectors and some minor incremental reforms, Modi hasn’t managed to introduce any big-ticket reforms yet.

As the mid-year economic survey pointed out, the Indian economy isn’t on a strong-footing yet as far as economic recovery is concerned, and faces significant challenges with respect to fresh investments and private sector performance.

Beyond GST, there was nothing much on the table for NDA to showcase on the reforms agenda. The Land Acquisition Bill, another key reform, is off the table for some time as it has been diluted and also has been largely left to the state governments to decide.

With the Winter session washed out, pressure will mount further on Modi, who has been hard-selling the India story to foreigners.The failure of GST Bill passage in Winter Session would put immense pressure on the Modi government to assuage the concerns of the investors.

For Congress too, there will be lot of answering to do to the informed middle-class voters as to whether its agitation in Parliament, such as National Herald (which was ultimately a court ruling), was strong enough to postpone key legislation India so desperately needed. For the country, now all hopes rest with the Budget session.

(With agency inputs)