NextGen to GenNext… Saga of India's Delayed Reforms

Published: 14th December 2015 06:00 AM  |   Last Updated: 14th December 2015 12:21 AM   |  A+A-

NextGen

Blame it on the definition. Perhaps it is time India stopped defining transformative change as next generation reforms. Frequently next generation reforms are stalled and stifled before eventually being delivered by GenNext. The idea of allowing 49 per cent FDI in insurance was mooted by Yashwant Sinha in 1998. India had to wait till March 2015 when his son Jayant Sinha piloted the legislation—next generation reforms mooted was literally brought in by generation next.

This week India witnessed a familiar saga—the subjugation of national interest for narrow political ends. The debate of who is at fault only leads the slippery path of endless equivalence—one party invented obstructionism and the other has patented it. Fact is, unless there is a miraculous alteration in political attitude, the promise of a unified tax system—which would enable efficiency and propel GDP growth—will be detained yet again.

To get a perspective, consider the chronology. The idea of a unified tax across the country was first visualised during the Atal Bihari Vajpayee regime in November 1999. A group of chief ministers led by Jyoti Basu agreed on the idea and a group of finance ministers led by Asim Dasgupta was set up. In 2004, the Task Force on Fiscal Responsibility and Budget Management led by Vijay Kelkar advised the Centre to work on and institute “a goods and services tax (GST), on the basis of a ‘grand bargain’ with states” that “will help foster a national common market”. In 2006, P Chidambaram announced it in his budget. In 2011, Pranab Mukherjee introduced the bill. Mind you, the idea has been shepherded by the broadest possible spectrum—from the left to the right.  First it was blocked by the BJP and now is being stalled by the Congress.  In December 2015, India is still debating the form and formulation of the idea.

It has been argued that the creation of a single tax system—which is what the GST promises to be—would enhance GDP growth by between 0.5 per cent and 1.5 per cent. The math is complex, but it is clear that the delay in the passage of this bill has cost the economy in terms of revenue, growth and improved productivity. The cost of delay cannot be without a price. So who is to be held responsible for the loss of opportunity and prosperity? That a transformative idea every party has agreed on—even if seasonally—should take 16 years for fruition is an indication of the sloth in the political structure.

The GST is by no means an isolated instance. The landscape is littered with instances of procrastination, incarceration and eventual legislation.

Land Acquisition: The need to replace the 1894 colonial law with an equitable arrangement was first recognised in November 1998. A group of ministers drafted a law for the 13th Lok Sabha. For nearly a decade, form and formula of acquisition and compensation was debated before the 15th Lok Sabha enacted the LARR Act 2013. In 2014, the government argued need for change and issued an ordinance. In December 2015, the idea and law are stranded in parliamentary process.

Companies Act: In 2002, the government realised the need for a modern law for companies. Two committees —led by Naresh Chandra and Jamshed J Irani—submitted recommendations. The 2008 Companies Bill lapsed in the 14th Lok Sabha. A new bill was introduced in 2009, modified in 2011 and passed in August 2013. By 2015, amendments were found necessary.

Pension Reforms: India needed a modern pension system. Two high-level committees in 2001 and 2002 suggested review of pension system for Central and state government employees. Budget 2003 announced the creation of the Pension Fund Regulatory Development Authority (PFRDA). The PFRDA was constituted in October 2003 and established in December 2003, but the statutory backing the PFRDA Act was passed only in 2013.

Nuclear Safety Bill: In March 2011, after the massive earthquake in Japan, government promises a Nuclear Safety Regulatory Authority (NSRA). The NSRA Bill 2011 is introduced. The Parliamentary Standing Committee submits report in 2012. The bill lapses in 2014. In December 2015, a new bill is promised and awaited. Meanwhile as India expands nuclear power generation, the IAEA has asked India about the NSRA.

The classic example of course is the Seeds Bill. India’s riskiest private sector is agriculture. The most critical input, the seed, is primarily governed by a 1966 law. In September 1999, it was felt that the existing law had many flaws and lacunae and a new law that can regulate the expansion of technology and diversity was needed to regulate this vital input. In December 2004, the Seeds Bill is introduced. In 2011, the bill is re-titled as Seeds Bill 2011. The bill lapses in 2014. In November 2014, the new government circulates the Cabinet draft to relevant ministries. Additional amendments are incorporated in April 2015. In December 2015, the Seeds Bill is yet on the list of pending legislation.

The instances symbolise the utter apathy of the political class. A review of the past decade reveals that over 100 bills lapsed as parties exchanged rhetoric. The list of lapsed bills represents virtually the spectrum of governance. The delay of decades in transformative legislation represents a flaw in the structure of political process.

Can India afford to wait while change is held to ransom by politics in the waiting hall of democracy? Perhaps it is time to consider an amendment to the Constitution that ensures time-bound clearance or time-bound rejection of legislation that is introduced in the house.

Shankkar Aiyar is the author of Accidental India: A History of the Nation’s Passage through Crisis and Change Email: shankkar aiyar@gmail.com

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