Finance minister Arun Jaitley will be making a brave attempt to push through reforms that require both legislative and non-legislative decisions in the coming weeks. It is likely that with some deft management and an accommodative stance, he could push through the Insurance Bill and the all-important Goods and Services Tax. Much of his success will depend on his own actions, and there is no reason why he can’t factor in reasonable demands by the Opposition to get at least GST cleared. Mr Jaitley will meet state finance ministers on December 11 on GST, and one hopes he is ready to bend to conquer them.
Likewise, the Insurance Bill can be tweaked to meet some of the Opposition’s genuine concerns. If the GST Bill is passed, it will really boost sentiments, and several estimates predict it could contribute two per cent to GDP. Like the Centre, states face a revenue shortfall in sales tax with crude prices falling. In Maharashtra, for instance, a reduction of Re 1 per litre in diesel and petrol by the Centre reduces sales tax collections by Rs 30 crores per month.
The issue of “rationalising” subsidies will need a lot of fair play on the part of Mr Jaitley and his government. For instance, it will be interesting if the government could tell the country how much it could save in all its social schemes if corruption gets controlled, if not wholly eliminated. There is corruption to the extent of 30 per cent in the National Rural Employment Guarantee Programme.
The Narendra Modi government has cut the allocation to this programme drastically to less than Rs 30,000 crores from Rs 40,000 crores, and this is unfair as 50 per cent of those who benefited from it were dalits and tribals. In contrast, Mr Jaitley and his government have been silent on lakhs of crores of revenue foregone by way of concessions to the corporate sector. Mr Jaitley will find his rationalisation of subsidies more acceptable if he was even-handed. India Inc would not need all these concessions if corruption is eliminated in the process of giving them various permissions to set up businesses.
In the real estate sector, for instance, it is said the cost of housing could be brought down by almost 10 per cent if corruption can be eliminated. It will be more realistic for Mr Jaitley to try and eliminate the corruption in this sector. His view, that it is interest rates that are hurting the sector, seems misplaced — if this was so, how is it that this sector can keep lakhs of flats vacant as it awaits higher prices. Mr Jaitley should look into how it could afford to do this if the interest rates were too high.
