STEMMING THE BLEEDING
With back-to-back setbacks in Rajasthan, Madhya Pradesh and Chhattisgarh assembly elections a couple of weeks ago and the general elections but a handful of months away, the Bharatiya Janata Party seems to be in damage control mode these days. According to many political pundits, the party has begun doing everything within its powers lately on multiple fronts to ensure that the dismal electoral results in the Hindi heartland are not replicated in the upcoming Lok Sabha polls.
Starting with the economy.
The BJP government had been drawing increasing flak over the manner of its efforts to usher in long-needed economic reforms. Over time Team Modi has found it increasingly difficult to defend its controversial demonetisation drive. It came without any prior warning two years ago, causing much grief to the common people and businesses for a good while what with cash shortages and job losses, just to name a few.
But it miserably failed to deliver on the biggest promise that it was launched with: to purge black money out of the Indian economy. The return of 99.3% of the demonetised notes to the national banking system, as per a Reserve Bank of India report released a few months ago, made many prominent economists conclude so, effectively ending any lingering debates over the issue.
The long-drawn-out, publicly ugly disagreement between the government and the central bank over myriad issues revolving around capital reserve levels and bank lending, which culminated in resignation of RBI governor Urjit Patel, also did little to help the Modi government’s image.
There was little scope to undo the perceived damage that was done with demonetisation and the RBI faceoff, but the same could not be said for the government’s biggest economic reform – the Goods and Services Tax (GST) – that had been rolled out amid much controversy and had continued to generate criticism for its complexity, flaws, hurried implementation, all of which were alleged to be detrimental to the interests of small businesses and industries.
And here is where the Modi government began the mending.
On December 18, during his address to the "Republic TV's" Surging India Economic Summit in Mumbai, Prime Minister Modi revealed that his government was planning to bring 99 per cent of items below the 18 per cent GST slab.
"Before GST, registered enterprises numbered 65 lakh, which has now increased by 55 lakh. Today, the GST system has been established to a large extent and we are working towards a position where 99 per cent items can be brought in the sub-18 per cent slab," he said.
Before his critics could say again that he needed to walk his talk on the matter, within four days after that speech, the government announced that the GST Council had removed a total of 17 items and six services – mostly products used commonly by the common man – from the GST regime's highest 28 per cent tax bracket.
This move was immediately applauded by the industry as a boost for demand.
"There are 28 items left in the 28 per cent bracket if we include 'luxury and sin items', and items used by economically well-off sections of the society, only one item of common man's usage - cement - remains in the bracket," Finance Minister Arun Jaitley said, briefing reporters in New Delhi after the 31st meeting of the Council chaired by him.
Second-hand tyres, video games, monitors and television screens up to 32 inches, and lithium battery power banks will now attract 18 per cent GST. The GST on wheelchair accessories has been brought down to 5 per cent from the existing 28, which will also allow the payment of input tax credit that is not possible with zero tax, Jaitley said, explaining that air conditioners and dishwashers were left untouched at the highest rate as these were not items of common use in India.
The Finance Minister stated that cutting the rates on cement and automobile parts would mean a combined revenue loss of Rs 33,000 crore, which the Council felt was "too steep" to be considered at present.
While the GST on third party motor vehicle insurance was cut from 18 to 12 per cent, cinema tickets up to Rs 100 were also been granted a similar reduction. Movie tickets costing more that Rs 100 were brought down from 28 to 18 per cent.
"It's a mass entertainment medium and its revenue impact is about Rs 900 crore," the Finance Minister said on the reduced tax on movie tickets.
GST on solar power generating plants and renewable energy items were also reduced. A major decision taken was that services supplied by banks to basic savings bank deposit accounts and holders of Jan Dhan accounts would be exempt from GST.
The Council also decided to form a seven-member Group of Ministers (GoM) to study anomalies in tax collection in some of the states which showed wide deviation from what was expected in terms of shortfall. "The Council has approved the proposal to form a seven-member GoM to study the revenue trend, including analysing reasons for structural patterns affecting revenue collection in some of the states," Jaitley said.
Jaitley also announced that the Council took 16 policy decisions in order to simplify processes like return filing and claim filing.
Commenting on the development, advisory multinational Deloitte said the selection of items for rate reductions "appear to be influenced by the desire to minimise revenue dips."
"The GST Council's decision to reduce the GST rates of certain items is a step towards keeping the indirect taxes rates at moderate level. This measure will bring down the final price to consumer and is expected to encourage higher demand/consumption with consequent boost to manufacturing sector," Deloitte India Senior Director R. Muralidharan said in a statement.
Confederation of All India Traders (CAIT) Secretary General Praveen Khandelwal said that the reduction in rates “on one side will lower the cost of production of large number of items and on the other hand will make consumers more comfortable."
"The reduction in GST rates announced would certainly bring economic benefits inter-alia political interpretations. Although, a lot was expected for the real estate sector, it seems the Government is taking one stitch at a time," said Grant Thornton India Partner Suresh Nandlal Rohira.
Two days later, the Finance Minister hinted that the country may eventually have a single standard rate of GST through merging of 12 and 18 per cent slabs, adding that the 28 per cent slab will soon be phased out, except in case of luxury and "sin goods".
He said the country should eventually have a GST structure which would have only slabs of zero and five per cent and a standard rate, with luxury and "sin goods" as an exception.
"A future roadmap could well be to work towards a single standard rate instead of two standard rates of 12 per cent and 18 per cent. It could be a rate at some mid-point between the two. Obviously, this will take some reasonable time when the tax will rise significantly," Jaitley said in a Facebook post.
Regarding the highest tax slab of 28 per cent, the Minister said with the GST transformation completed, India was close to completing the first set of rate of rationalisation by phasing out the highest slab except in luxury and sin goods.
"The sun is setting on the 28 per cent slab... Today, barring tobacco products and some luxury goods, almost all items had been transferred from 28 per cent slab to 18 and 12 per cent.
"Only cement and auto parts are items of common use which remain in 28 per cent slab. Our next priority will be to transfer cement into a lower slab. All other building materials have already been transferred to 18 and 12 per cent... The 28 per cent slab is now a dying slab," he said.
Attacking the Congress and other opposition parties, Jaitley said their criticism of the GST was "ill-informed" and "motivated". He said during the pre-GST regime, a large number of commodities were taxed heavily and that the Congress legacy was a 31 per cent indirect tax.
"Those who oppressed India with a 31 per cent indirect tax and consistently belittled the GST must seriously introspect. Irresponsible politics and irresponsible economics is only a race to the bottom," he added.
Jaitley said the political noise outside the GST Council was inconsistent with the harmony inside as at its 31 meetings, the body has "behaved with utmost responsibility" taking several thousand decisions unanimously and with consensus.
Referring to the government falling short of the collection targets, the Minister said the targets set in the GST regime were unprecedentedly high, with a 14 per cent increase over 2015-16 tax collections guaranteed.
"Thus, even when 18 months have not been finished since the launch of GST, on this day every state has a target of improving its revenue with three 14 per cent increases compounded annually over the base year of 2015-16. This is close to a 50 per cent being reached in the second year itself," he said.
"It is almost an unachievable target. Yet six states have already achieved it, another seven are within a striking distance of achieving it and only 18 are still more than 10 per cent away from achieving it."
Moving on to the Modi government’s renewed efforts towards social reforms.
On December 17, it got the Transgender Persons Rights Bill passed in the Lok Sabha. Union Minister for Social Justice and Empowerment Thaawarchand Gehlot sought cooperation from the opposition members and pushed for Transgender Persons (Protection of Rights) Bill 2016 that provides for protection of rights of transgender persons and their welfare.
He said the Bill was important in view of the rights of the transgenders and urged the members to pass it. The Bill was introduced in the Lok Sabha in August 2016 and as per the demands of the members, it was referred to the Standing Committee on Social Justice and Empowerment. Gehlot said that as many as 27 suggestions made by the Standing Committee were accepted in the Bill.
However, the one on Triple Talaq remained contentious. When Union Law Minister Ravi Shankar Prasad introduced the Muslim Women (Protection of Rights on Marriage) Bill, 2018, there was much ruckus in the House with fervent opposition from the Congress.
Congress member Shashi Tharoor opposed it claiming it was targeted at a particular religion and hence unconstitutional. "The bill was based on the ground of a specific religion and it was violation of Sections 14 and 21 of the Constitution. This is a misconceived bill," he said.
Rejecting his objections, Prasad said: The Bill was brought in as per the direction of the Supreme Court to protect the rights of Muslim women. Several Muslim women suffered due to instant talaq. This bill is in the nation's interest and constitutional. The objection is baseless."
Three days later, Prime Minister Modi said despite all "obstacles" from fundamentalists and Opposition, his government was committed to bringing a law against the practice of triple talaq to ensure social justice for Muslim women.
"Despite all the obstacles, despite resistance from the fundamentalists and the Opposition, the government is committed to making a law against triple talaq so that our Muslim women get rid of a big insecurity in their social life," he said addressing the National Convention of BJP's Mahila Morcha in Gandhinagar district of Gujarat.
Modi reminded all that the government had already done away with the condition of a ‘mehram' (a male guardian including husband or first blood relations) to accompany a woman on Haj.
Since then over 1,300 women have performed the Haj without a mehram.
Speaking at the event, Modi listed a number of schemes that his government has brought for the welfare of women such as Ujjawala and Surakshit Matritva among others. "Women are at the centre of several flagship programmes of this government...for the first time there are two women in the Cabinet Committee on Security (CCS)," he said.
The Prime Minister said his government was trying to promote women entrepreneurs through various schemes including the Mudra Yojana under which the major percentage of loans had been disbursed to women entrepreneurs.
He also said that his government would be relying on women power to strengthen its booth-level management during the 2019 general elections.
"You should take a pledge, 'Mera Booth, Sabse Majboot [My Booth is the Strongest]'," Modi said, a few minutes before declaring that one of his government’s prime objectives was “to empower maximum number of women".
On the political front, too, the Modi government has begun taking a more proactive stance. This was most evident during the BJP leadership’s recent visits to Bihar and Odisha.
Soon after sensing that there were concerns within Lok Janshakti Party (LJP) – a BJP ally – over seat-sharing arrangements in Bihar for the 2019 Lok Sabha polls, Union Minister Arun Jaitley held discussions with LJP chief Ram Vilas Paswan and his son Chirag Paswan.
After the meeting with Jaitley, LJP Parliamentary Board Chairman Chirag Paswan expressed hopes that talks would move in the right direction. "Talks are going on. An announcement will be made at an appropriate time. We have put our points before the BJP leadership and the important thing is that we are being heard. Hope everything will be fine," he told reporters.
However, his uncle Ram Chandra Paswan, who also attended the meeting, assured that the LJP would remain part of NDA. "We are and will remain in the NDA. Seat sharing will be announced this week," Ram Chandra Paswan said.
"The party, which is having stronghold in any specific area, should be respected. We are a small party. We need adequate time for preparation. That's why we wanted the issue to be resolved at the earliest," he told reporters.
Similarly, when Prime Minister Modi visited Odisha recently, he refrained from making any personal attacks on Chief Minister Naveen Patnaik and focused more on general governance related issues within the state. This was a clear departure from the BJP leadership’s hitherto aggressive and offensive rhetoric against Naveen and the Biju Janata Dal, replete with corruption accusations, ageist remarks and everything in between.
On the other side, however, the BJP aggressively stepped up its defence against opposition accusations over the Rafale deal.
Soon after Congress president Rahul Gandhi said that his party and other opposition parties would not let Modi sleep till he waives farmers' loans, the BJP said it was the Congress that had indulged in "corruption and misgovernance" for the past 60 years to ensure that people of the country did not sleep.
"I have come to understand that Rahul Gandhi will not allow Narendra Modi to sleep. This is a new low in public discourse. Nothing better is expected from Rahul Gandhi whose party ensured the people of the country do not sleep for 60 years by corruption, malgovernance and patronage of selected people," said Law Minister Ravi Shankar Prasad.
Prasad also attacked Gandhi over his remarks that "chowkidar is thief."
"People of the country have given him votes to be a `chowkidar' against corruption and that 'chowkidari' will be done honestly. Whether it is Ottavio Quattrocchi or Christian Michel in some new form - our government will be a chowkidar looking over all of them," he said.
Prasad refuted Gandhi's allegation that government was running away from debate on Rafale deal, saying the Congress leader owed an apology after Supreme Court dismissed four petitions seeking a court-monitored probe into the purchase of 36 Rafale jet fighters.
"Today also we said that we are ready for a debate. We want the Congress to show some courage to debate on Rafale. In Congress cupboard, there are so many skeletons in defence purchases. We will discuss all of them openly and we will also discuss how important issues were ignored. Our allegation is that the Congress is running away from debate on Rafale."
"All your lies were uncovered by the French government and the Supreme Court. So, come forward and debate. We will look you in the eye and we are ready to debate with you on Rafale in both the Houses," Prasad said challenging the Congress.
Referring to Gandhi's concerns about farmers, he said: "The entire saga of the suffering of farmers in the Congress regime is too well-known."
On Gandhi's allegation that the government was working for the benefit of a few industrialists, Prasad said the Congress leader should not forget that fugitive industrialist Vijay Mallya was provided "loan restructuring" by the Congress-led government.
"Nirav Modi and associates and many other diamond merchants were given the benefit in 2014 in violation of model code of conduct just a week before the Modi government came to power. We all are aware how phone banking had become the order of the day by allowing loans to even non-compliant groups. This has been the sad saga of the Congress," Prasad thundered.
Once again when the Opposition attacked the government’s move to snoop on all computers by intelligence and investigating agencies, the ruling BJP sought to remind the nation that under the Congress-led UPA, up to 9,000 phone calls and 500 e-mails were intercepted monthly.
Defending the Ministry of Home Affairs (MHA) December 20 order allowing 10 Central agencies to "intercept, monitor and decrypt any information generated, transmitted, received or stored in any computer", BJP spokesperson Sambit Patra alleged that as against the Modi government's "legal" order, the UPA regime "snooped on people illegally".
"The people who were snooping on 9,000 telephone calls and 500 emails every month are now accusing others of snooping," said Patra citing RTI replies claiming that "between 7,500 and 9,000 orders for interception of telephones were issued by the UPA government on a monthly basis".
"The political party which enforced Emergency is now preaching us. The Congress despite losing ground continues to play politics over national security," Patra alleged.
While speaking to a huge gathering on the occasion of the Bogibeel rail-cum-road bridge in Assam, Prime Minister Modi launched a scathing attack on the Congress, without naming anyone, saying that no one could have even thought four years back that the 'key secret player' (sabse bada raajdar) in the AgustaWestland helicopter deal would ever be in an Indian jail.
"No one ever thought that 'sabse bada raajdar' in the helicopter deal would be in an Indian jail. Our government did the work to bring him back to India and hand him to the law enforcers," Modi said while referring to the recent extradition of Christian Michel, the middleman of AugustaWestland helicopter deal.
Amidst all this, political analysts have begun debating whether the Modi government is doing enough, and does it have time enough, to ensure that it retains power after the coming general elections.
There is no denying that the Congress has bounced back into contention and in all likelihood will give the BJP a run for its money in the Lok Sabha elections, but there is no saying whether the grand old party has earned back enough trust of the nation to vote it back to power. It needs to do much more than what it has done so far to be in that position.
Under those circumstances the chances of a Third Front – a united force comprised of non-BJP and non-Congress regional parties – coming along to stake claim seem to be rising by the day.
However, all is not lost for the BJP – not by any means. As the ruling party, the ball is still in its court. Its performance over the next three months will still have a huge bearing on its results in 2019. But it must never lose sight of one big reality: time is running out.