The wait for reforms
Tax reforms in India are never easy. Resistance comes from all corners. In a country where the tax adherent lot is a miniscule minority, it is politically expedient to delay reforms that widen the tax net and bring everybody under tax scrutiny. To be fair, both the Congress and the BJP want to achieve this when they are in power. But, when out of power, each wants to stop the other from bringing in the relevant laws. So like the classic tale of Indian crabs being transported in open containers, GST reform is refusing to see the light of the day. One party or the other is refusing to play ball. And, pulling the other party down. But, there is a deeper significance to this attitude of stalling reforms. The leaders in the BJP who stalled parliament for three years all lost their shot at the top job of the country. That the leader of the congress is personally leading this is definitely not going to impress an electorate who want rapid transformation and change. Rapid change and transformation can ill afford to be stalled or slowed down now and it could have disastrous electoral consequences on the leaders who are seen as the stumbling block. Their ability to win will become suspect and this could lead to leadership challenges and hung verdicts in the future. The saner option before the Congress would be to negotiate and act statesmanly. This would give it a shot to rightfully claim participation and contribution in the process of economic transformation. I suspect the GST drama is moving in that direction under Rahul Gandhi. What if a black swan hits GST and the Congress derails it? The BJP would need to sweat it out even more to create a better direct and indirect tax regime. This alternative needs to create complete tax compliance and generate higher revenues. Either way, we are headed towards a better revenue regime and a stronger macroeconomic climate. It is a “heads we win, tails you lose very little” situation for India. The mood in Delhi could change our market mood very rapidly this winter session.
“The need for patience if big profits are to be made from investment.” -Philip Fisher