India is not likely to get the Goods and Services Tax (GST) any time soon considering how parliament is function (or not functioning), a reform that everyone admits is needed though there are some differences over the details. The stock market, already jittery over the imminent rise in the interest rates in the US, is rightly disappointed, and has expressed its anguish the way it does best, falling sharply over the last two days.
A compromise, the hopes of which had arisen after Prime Minister Narendra Modi hosted former PM Manmohan Singh and Congress president Sonia Gandhi for tea, looks difficult with the principal opposition party taking a strong stand on the judicial developments in the National Herald case. Congress has, in fact, escalated the attack, calling it “vendetta coming out of PMO”. The pot will be boiling till at least December 19, when the Gandhis have to appear in the court. And these strong positions are not easily reversed. It is unlikely that the Parliament will be allowed to function till then.
Is GST such a big thing? Why has it become the defining symbol of reforms? The country has lived without this single levy, which will replace multiple indirect taxes, all these years and can continue without it for many more. Its gains are largely efficiency benefits, by some estimates up to 2% of GDP. It’s importance, however, goes beyond that.
If the political class cannot come together, in the name of the nation, for a reform that is universally acknowledged to benefit the country, what hope is there for some of the more contentious reforms? Will the country ever get the changes in labour laws needed badly to encourage employment? Or a bankruptcy code that is required to shutter businesses quickly, which can reignite investments by encouraging entrepreneurship and risk taking. The economy has lost lot more than GST, at least for now, and the stock markets are likely to drift lower when the realisation sinks in.