If news reports are to be believed, there are worrying signs on the reform front. foreign institutional investors (FIIs) have already begun speaking out about the lack of momentum in the government's reform drive, the latest being Jim Rogers. To be fair, the government has moved forward on issues relating to mining, energy & labor reforms. But the recent slowdown in the pace of reforms has many worried. While the land acquisition bill remains stuck in Parliament, a new issue may now give headaches to the government: the crucial GST bill.
The Goods and Services Tax issue has been stuck for years. The UPA government could not move forward due to opposition from state governments. The Modi government has thus far taken the states into confidence. The GST Bill has finally been introduced in parliament with the provisions to address the state's concerns. It is to come in to effect from 01 April 2016. However, it has run in to trouble with some political parties voicing their opposition to it.
The bone of contention seems to be the issue of routing the funds raised via the newly created GST council. The states claim that the centre will enjoy a veto on the council while the states will have only equal weightage. Also, their demand is to keep petrol and all petroleum products out of the GST ambit. Now these are not new issues. It was expected that these concerns too would have been ironed out by now. However, it appears that it is not the case.
Will the GST meet the same fate as the Land Acquisition Bill? We certainly hope not. The government can easily pass the bill in the lower house where is has a majority. However, it is nowhere near a majority in the upper house. The GST is of great importance to the economic future of India. It will provide multiple benefits to various sectors of the economy. In the Finance Minister's own words, it is "the single most important tax reform after 1947". The country will watch closely and hope that politics does not trump economics at this crucial juncture.