Recall the year 2013 when everyone, including the current
crop of leaders, criticised the Congress-led UPA government for the stalled
projects, corruption charges, ill-thought-out legislation and inaction on many
fronts. The then opposition often used the word “policy paralysis” to relate
with the way the government functioned. The then Prime Minister Manmohan Singh
was accused of being a
mauni baba, who allegedly acted only when
Sonia Gandhi pressed the remote button.
Things changed and the public voted out the UPA government,
thinking that Narendra Modi will add some spice to their life and will bring
some relief to the ailing economy. Year one, we felt that things would go on
the right track. Modi made a lot of announcements, launched new schemes and
even went abroad, pitching to the foreign institutional investors, reciting the
encouraging and overwhelming tale of how India would be in the coming years. He
was able to win their confidence. Hopes revived as many expressed interest in
investing money and many agreements were signed as a token of their expression
of interest.
The stock market, which had acquired a bearish tone, rallied
and we could see BSE Sensex crossing the 20,000-mark and going on and on
towards the 30,000 mark. Never before had India seen such a surge in share
markets.
Then came the ill-fated November 8 when out of the blue,
Modi made an announcement of scrapping the 500-rupee and 1000-rupee notes
albeit in
the name of weeding out the black money the rich people were assumed to have
piled up. What a masterstroke, people thought! Modi had the guts to take steps
which could annoy his own vote bank – the traders – said many.
India Inc. welcomed the step. The general public stood
stoically with the government amidst anarchy and chaos. Despite the trouble the
people had to face standing in long queues before the banks, they praised Modi.
That was how people reacted initially. Some even related the struggle to no
less than another independence struggle. We were told that most of the bad cash
would become a mere piece of paper, useless and invalid.
Soon, we realised that it was a futile exercise as the RBI
got a major chunk of the specified bank notes in circulation back into its
coffers. Even the apex bank had no clarity while dealing with the situation, as
it had issued a notification almost every day — 74 notifications, to be more
precise, during the 50-day period. Imagine the monumental task the bank was
entrusted with, without much deliberation and discussion. The RBI governor must
have had sleepless nights.
When it was confirmed that the gamble was a failure, the
government started changing goalposts and labelled it as a move to usher in a
cash-less economy. When the concept of cash-less economy also failed to
attract, it had another goal – an economy with less-cash. A year later, cash is
still the king. India is not even a less-cash economy. People are back to track
with their age-old habit of dealing in cash.
Finance minister Arun Jaitley called it as a “watershed
moment”. No doubt, India never underwent disruption at such a large scale. It
was certainly unprecedented.
Time passed. We thought, we could recoup. Suddenly, in
another mid-night drama, like the night when Prime Minister Jawaharlal Nehru
made his famous tryst-with-destiny speech, we were inflicted with another injury.
We had the GST, which the Congress vice-president Rahul Gandhi terms as “Gabbar
Singh Tax”, instead of Goods and Simple Tax.
We were told that the GST would make our life easier as we
would have only one tax throughout the country. Instead, what we had were four
different slabs, actually eight. We have products and services to be taxed at
5, 12, 18 and 28 per cent. And then there are certain things which are exempt
with zero rate. Diamond will be taxed at 0.25 per cent and gold at 3 per cent.
We also have a cess for luxury items and the rate varies from 290 per cent to 1
per cent, depending upon the product.
The 213-page document, detailing the simple tax, has
undergone several changes since it was enforced. It seems the government wanted
to collect the maximum amount of tax. But soon it realised that the step could
go against it and hence many items were shifted to the lower tax slab within
days of its enforcement. The GST Council has already met 23 times.
The number of policy and tax rate changes by the central
government and the GST Council can only parallel the numerous notifications
issued by the RBI during demonetisation! We have only one wish for a smoother
GST transition with no more hiccups. The government says it is evolving every
day. We feel that it is an ill-thought-out exercise implemented in a hurry
without giving much thought on its implications. The government is back to
square one every time it revisits GST.
The rates apart, three types of GST – Central GST, State GST
and Inter-state GST – have already confused us. It seems the concept of “one
nation, one tax, one market” remained only in the minds of the legislators.
What appeared on paper was several taxes, several markets, several returns,
several rates, several categories and many more!
A survey conducted by a leading daily after the recent
amendments showed that many felt happy that there are only 50 items that fall
in the highest tax slab. But a majority feels that it will take another six
months or even a year to stabilise operations.
Even though the frequency of filing returns has been changed
from monthly to quarterly basis, transitional issues like issue of credit,
clarifications, simplification of compliance, anti-profiteering norms etc. are
big issues surrounding the GST. We are sure a majority of them will be resolved
by 2019 in view of the Lok Sabha polls due in 2019. We do not know whether it
will actually work for the Modi government.
These apart, let’s see the status of project approvals – one
of the major issues when the UPA government was in power. Modi had made a
series of promises vis-à-vis easy approvals, fast-tracking of projects and
creating an environment of “trust and leadership”. However, his words seem to
have no substance.
The recent data published by the Centre for Monitoring
Indian Economy (CMIE) show that the value of stalled projects has increased to
a whopping Rs. 13.2 trillion as on September 30, 2017. This means that 13 per
cent of the projects under implementation are stalled. Out of these projects,
nearly two-third applications are from the private sector with over 20 per cent
value, which has been the highest since March 2004.
However, going by what Jaitley said recently, it seems the
minister is living in a different country altogether. He claimed that the
government has eased environment clearances. The numbers tell a different
story. The CMIE data show that around Rs. 5 trillion worth of projects are
stalled due to lack of environmental clearances, fuel and raw material issues
and lack of funds. This accounts for nearly 40 per cent of the stalled projects
as on September 30, 2017.
This has affected the announcement of new projects. The
value of new project announcement is only Rs. 31,000 crore till last quarter
which is insignificant, compared to Rs. 1.79 trillion and Rs. 1.69
trillion in the same quarter in 2016 and 2015 respectively.
The data have come at a time when the government is already
facing criticism for what the Indian economy has been inflicted with after the
unwanted exercise of demonetisation and a hurried implementation of the GST.
The government’s “ease of doing business” rhetoric is only valid for a few
business groups. It seems the small traders figure nowhere in Modi’s idea of
“New India”.
It is time Modi wakes up from his slumber to take concrete
steps for bringing his government out from the “policy paralysis” it suffers
from. We do not need a speaker, a “political campaigner” holding the country’s
highest office. We have already gone through several policy shocks which have
accentuated uncertainties and made investment riskier. We need an administrator
who understands the nuances of Indian economy and is able to bring us out of
the current crisis.
(The writer, a company
secretary, is director, communication, Deepalaya, and can be reached at jassi.rai@gmail.com)
(Published
on 20th November 2017, Volume XXIX, Issue 47)
