The forging of a nation takes centuries and India has been in that process for millennia. It wasn’t independence that gave birth to India but to a large extent gave the country its current geographic limits, baring in mind that they were much larger in different moments of history. India’s independence brought the nation political and, only partially, geographic unity. The country has an atomised market, which is the single most important obstacle to its growth and development. It is senseless that a producer, say from north India, can purchase supplies with far greater ease from China than south India or any other state. To illustrate this reality, as Spanish Ambassador to India, I was only tax exempt from sales tax in Delhi, but not in Gurgaon. My dear friend, the Indian ambassador to Spain, would be tax exempted everywhere in Spain in spite of being a fully decentralised nation with a growing fiscal diversity. It is evermore obvious that internal fiscal borders in India are a huge burden on the nation’s progress. The delays to transport goods from one state to another have killed India’s competitive advantages and given others an edge.
Seldom has fiscal reform had such a deep impact on politics, policy and potentially even on geopolitics. The GST is a historic revolution, perhaps the most important since Independence. Fiscal policy has to be a matter of national interest, beyond the political dispute. In this sense, it has to be said the GST is not only good for India, but is also essential and indispensable.
Take the EU for example. Its quest for unity started with modest goals—unity around coal, steel and atomic energy. The EU’s most important achievement, only second to European reconciliation, is the Single Market—that the UK is going to leave because of Brexit. The single market is a powerful motor of prosperity and growth. India is going to see much brighter years once the GST and single market see the light.
Complex and decentralised nations share many common problems, among others the alarming lack of fiscal and market unity. India is not the only case, but it doesn’t justify that it should suffer the same painful fate.
In the US, tax autonomy, although a serious burden, has not significantly obstructed the single market. Here there is no such thing as state borders for trade, but as far as retail is concerned, the country is far from being a single market. This weekend is ‘tax-free weekend’ in Virginia, and consumers from neighbouring states will flood its malls and outlets to take advantage of a measure that does not exist in their states, or is not implemented on the same dates.
India was in an even more dramatic situation, but with the unified GST, it will reach unprecedented market and fiscal unity, which will reflect in consumer confidence and in the nation’s self-respect. The country’s export capacity will be also be strengthened and its competitiveness will rise exponentially. All of this will have an immediate effect on India’s international influence—the
better its economy will perform, the bigger its say in world matters, many of which are inevitably connected to the economy.
A healthy economy, solid job creation, and a reinforced political unity through fiscal policy will allow India to punch at its real weight level. Today growth, competiveness and a growing economic stability have one obstacle less. Now is the time to get rid of the rest of them. The country’s economy, business community and above all its citizens will be forever grateful for such a quantum leap in the nation’s history, as for the first time every Indian citizen will have equal fiscal rights, and equality in fundamental rights, freedom and obligations is a democracy’s most important pillar.
Gustavo De Aristegui is the Former Spanish ambassador to India