by Harish Gupta, National Editor, Lokmat Group
With winter session of the Parliament a couple of days away, everyone who has a stake in the national economy — be it as job seeker or investor — is keeping his fingers crossed for the long-awaited clearance of a slew of pro-reform bills. There is little hope, though, that what the BJP-majority Lok Sabha proposes will not be disposed as before in the Rajya Sabha where the ruling party is in utter minority. However, one must be a daring gambler to place bet on even a temporary truce between the treasury benches and the opposition any time soon, if at all. "Reform for me", tweeted Prime Minister Narendra Modi, "is just a way station on the long journey to the destination. The destination is the transformation of India". While it remains unclear as to how does he intend to transform India, and into what, one thing that is clear is the rising disenchantment in the country with Modi's last year's election promise that achhe din, better days, are round the corner. The engine that moves a democratic government is the Parliament has predictably been brought to a grinding halt.
The previous monsoon session was indeed a wash-out in the midst of persistent demand from the Congress for resignation of BJP functionaries involved in the government allegedly winking at fugitive cricket entrepreneur Lalit Modi evading prosecution in India. The outlook of the coming session seems no better. Most opposition parties, particularly the Congress, have been greatly energised by the BJP's rout in Bihar. Their agenda for the Parliament has been set by the outcry against "intolerance". Congress vice president Rahul Gandhi seems having become particularly aggressive after his party's nominal electoral success in Bihar. BJP, on the other hand, has kept escalating its attack on the Congress, with its ideological brother Subramaniam Swamy having initiated a web of corruption charges against both Rahul and his mother Sonia Gandhi, Congress president. It is certainly not the atmosphere suited to bipartisan lawmaking. Which is a pity, as it will push away once again the possibility of having a Goods and Services Tax (GST).
Much of India's future ability to attract investment depends on having a law like GST as it levels the states' uneven tax rates, thus giving the national economy the tax uniformity that distinguishes the European Union. The GST council may settle for a steep rate of around 25 per cent, which is potentially inflationary, and yet exclude items like petrol and petroleum products, not to speak of alcoholic beverages etc. Still, a GST in some form is better than having none. But that's exactly how things seem to be now poised. After having opposed GST during its long stint as the main opposition party, BJP, on assuming power, suddenly turned its supporter. But instead of putting the relevant Constitution amendment before the Standing Committee, the Modi government got it passed straight in the lower House. Congress and its allies returned the compliment by blocking it in the Rajya Sabha.
Furthermore, logjam in the Parliament may put in the no-go area yet another crucial legislation concerning bankruptcy. Finance Minister Arun Jaitley is hopeful of putting into effect a new law that may set a swift deadline of 180 days for passing final verdict on a sick firm and allow it another 90 days if creditors agree. According to a World Bank estimate, it takes 4.3 years on an average for a bankruptcy dispute to be resolved in India. In a recent article, The Economist magazine reported that the recovery rate of debts in India is just about 25.7 per cent which, as it said, is one of the worst rates in developing countries. The classic case of mega-default is Kingfisher Airlines which was grounded in 2012 after leaving a debt of US $1.5 billion. If the law is passed, many sick firms can be revived instead of being left to die slowly. Besides, the banking sector, reeling under stressed loans which have gone up five times to US $133 billion since 2011, can also breathe freely.
It is not that the economy is growing so impressively that the government can remain unfazed by the parliamentary gridlock faced by its efforts at reform. It's not so easy to look the other way. RBI governor Raghuram Rajan has recently commented on the potential harm from lack of private and public investment, and if the government has no fund to raise investment, the private firms too are running 30 per cent below capacity. Judging from Prime Minister Modi's relentless foreign visits, it is obvious that he wants to make up for the shortfall in domestic investment with foreign investment. It worked in the first half of this year, with US $19.4 billion FDI rolling in during the period. But the roadblock to pass laws has hit the headlines all over, and investors have become cautious. For the first time since September 2013, when Modi’s name was aired for the first time as a possible PM and foreign institutional investors began to buy Indian stocks, there was no net outgo of foreign fund from the Indian bourses, till very recently. A possible increase in the US Fed rate, combined with failure of the NDA government to pass GST and bankruptcy laws, may cause bloodbath in the stock market, not to speak of its bizarre backwash on the economy.
There is not much time left, therefore, for Modi’s grandiose project to “transform” India. The more urgent task for him is to stop thinking that the Opposition can be bullied into submission. Instead, he must instill into his adversaries the comforting feeling that they will get an equal share of credit if jobs and investment figures begin to look decent again and growth comes automatically instead of being puffed up with slick numbers. If a pragmatic Modi can adopt Aadhar, MANREGA and other UPA schemes, what’s the problem in taking the Opposition along the GST, Bankruptcy law to transform India.
