The past year has been characterized by growing confidence and conviction in the India Growth Story. Ever since the Narendra Modi-led government has come to power, every session of the parliament has witnessed the passage of key legislations with a far-reaching impact on reviving the economic growth trajectory of India.
However, marked divergence of opinion across the political spectrum, especially on economic matters, has become a characteristic feature of our democracy. This has polarized our domestic polity to the extent that legislative proceedings of the monsoon session are now in a logjam and passage of key economic bills are held up. Estimates indicate that the national exchequer is losing Rs 2 crores a day due to parliamentary disruptions.
We expect a broad consensus to evolve across political affiliations for thorough and productive deliberations in the parliament. In particular, the current session provides a window of opportunity to enforce key legislations on Goods & Services Tax (GST), real estate regulation and labour reforms.
Goods & Services Tax (GST): The Game Changer
GST can be a game changer for the Indian economy as it would lead to simplified indirect taxes with easier compliance norms for business administration. Independent studies indicate GST rollout has a potential to help India's GDP grow by 0.9-1.7% annually with an increase in tax revenues to the tune of 0.2%. With the new tax regime in place, tax liabilities are expected to come down which can result in 20% lower logistics costs for non-bulk goods. Domestic products and services would become cost effective and contribute to 3.2-6.3% increase in exports of the Indian economy.
For the economy to effectively harness the intended benefits of GST, some aspects have to be suitably addressed. Revenue Neutral Rate must be suitably determined to reduce the overall tax burden. The threshold limit for GST should be fixed so that the interests of small business are protected. While states can be compensated for the revenue loss from GST, we must ensure that the basic structure of GST is not diluted. In particular, all taxes and imposts levied on goods and services including those by urban local bodies can be brought within the GST framework.
Regulating Real Estate
Another significant bill which has a nod from the Union Cabinet and should get clearance in Rajya Sabha (Upper House) is The Real Estate Bill. It will give a strong boost to the real estate sector in India. The bill proposes that a Real Estate Regulatory Authority (RERA) be created, and all housing and commercial projects will require prior registration with this regulator. This will create a uniform regulatory environment and protect interest of buyers.
Developers will have to make mandatory public disclosure of all registered project details such as land status, real estate agents, contractors etc. After such disclosure, the developers cannot alter plans, structural designs and architectural specification except minor additions or alterations. For efficient project execution, the bill also proposes that a compulsory deposit of 50 percent value of overall real estate project is made in a separate bank account within fifteen days of registration to cover the cost of construction. There is also proposal of formation of Real Estate Appellate Tribunal to fast track settlement of disputes. As the real estate and housing sector grows in India, this bill will ensure orderly growth. This can provide great economic growth multiplier for India's economy.
Labour Laws & Small Factories Bill
Labour is another aspect where India needs urgent reforms. Existing laws have not been able to bring about vibrancy in the labour market that can keep pace with the dynamic ethos of globalization. Parliament can prioritise select legislations to strengthen safeguards for workers' rights as well as address some of the labour related constraints of business.
The Child Labour Bill will strengthen safeguards against child labour by clear delineation of prohibited sectors of employment as well as increased penalty for breach of the law. This is going to make India a safer workplace and a responsible investment destination in the long term.
The Small Factories Bill is expected to standardise working conditions and payment of wages in SMEs which are one of the pillars of the Indian economy. The provisions of the bill will improve social security of workers and scope of women's employment in small firms. Moreover, the bill will rationalize 14 central labour laws for small enterprises into a single legislation and improve the ease of compliance.
Finally to reiterate what the nation expects, we hope the lawmakers can ensure that the parliament session bears fruition towards the larger interests of the economy. This is essential to strengthen the legislative process and reinforce the citizens' belief that their interests are paramount in our democracy.