GST: A good policy undermined by regional politics

dollarIndia’s taxation system is not as transparent as those of the developed economies. It is estimated that GST (the goods and services tax in the pipeline and expected to be implemented by the new government) can add up to 2 per cent to the overall GDP growth rate of India. The GST is likely to bring about a qualitative change in the current tax system by redistributing the burden of taxation equitably between manufacturing and services. A study by NCAER (National Council of Applied Economic Research) predicts the impact of GST on growth through direct cost reduction as well as cost reduction of capital inputs. The study implicates a growth in GDP to be between 2-2.5% with the implementation of a well-planned GST. It anticipates an increase in exports between 10-14%. The GST then calls for a boost in action to usher this system as soon as possible.

The anticipated Goods and Services Tax (GST) is a classic case study of lack in political will and collaboration. It is holding back an initiative on contribution for a much needed economic boost in the country. GST is India’s ambitious indirect tax reform plan and it has all the right intentions and aims at bringing together a common market by dismantling fiscal barriers between states. The idea is to have a single national uniform tax levied across the country on all goods and services.

The implementation of GST faces political hurdles as States fear loss of discretionary fiscal power and revenue losses upon implemention. They want some assurance on protection of revenue loss as a result of the implementation of GST. The new government will have to quickly implement economic reforms to jumpstart a slowing economy and GST can be a important factor in pushing those reforms. What will be needed is State and Central Government initiative to reach a uniform rate (number) that works by safeguarding and balancing each’s interests. Also, a single rate system is bound to result in low compliance costs, prevent classification disputes, and result in a uniform approach for all players which is likely to work in national interest. But again, a single rate cannot be too high or too low. The rate must be high enough to meet the worries of the States on revenue neutrality. Quick decision making and speedier implementation are vital to turn things around and IT connectivity is a prerequisite for right implementation of GST.

Making the taxation system transparent and predictable will not only boost investor’s confidence but also invite new trade prospects nationally and internationally. India not only needs fast implementation of the GST but also reforms on broadening the tax (direct) base. Once the how’s of implementation are reached with bipartisan consensus and upon dwelling on bigger objective like improving India’s economic growth, it will put GST in perspective as it is expected to essentially remove trade barriers.

 Your thoughts are welcome.

 Sanjay Puri has been working on Indian-American issues and facilitating stronger US-India relations through USINPAC (US India Political Action Committee and AUSIB (Alliance for US India Business), two bipartisan organizations that he chairs.

 

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Boon or Bane: Will prospective buyers benefit from the cash-strapped real-estate industry’s Involvement in the 2014 India Elections?

Today, the archetypal construction landscape in India appears devoid of any heavy-duty construction activity. Workers are seen in a state of respite, and equipments and vehicles remain parked. While recent homeowners fume at the delay in construction, builders cite excuses including inflation, elections, and bureaucratic or governmental concerns. It is evident enough that although it is a time of inertia in the world of construction, it is business as usual. It is just that almost all builders and real-estate organizations have shifted their focus on funding political parties in their campaigns at the moment. Amusingly and interestingly enough, a 2011 study shows that the level of cement consumption – the yardstick for construction activity dips to about 12 percent during elections and this time is no exception. If you have considered buying your dream house or apartment, it might just be the appropriate moment for you to get the best deal possible. All that you’ve got to do is find out enough about which political parties the builders are pitching in for. And here is why.

As India goes to the greatest poll ever, a pall of financial uncertainty looms large over the real estate industry in the country.  At this stage, real estate and construction companies are pinched for cash as many of their projects are stalled at least until the elections are over. Now the returns and stakes are high; if the party of their support rose to power and glory, the particular builder would’ve struck their Midas touch. In other words, it would mean winning the right land deals and acquisitions through them, especially in hotspots like the NCR region around New Delhi.  Here money and power are the game changers; for instance, if your builder won contracts through their political affiliations after the elections, you would also earn the slice of a nice plot of land and your home would be built in no time. However, there may be a downside to it too. If your builder’s party of support did not gain political prominence post the 2014 elections, it may take a while for you to have your house completed.

There is a surge of the Modi wave – India’s Prime Ministerial candidate from India’s opposition party, the Bharatiya Janata Party or the BJP. He is expected to usher in both political and financial change if he were to come to power. The market promises growth and despite the yearlong dip in the construction industry’s profit in the cases of DLF and Oberoi Realty, the industry has made some gain too. Therefore, with some amount of business wisdom and caution, you can seize the moment and take a plunge on buying a new home.

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How about an NRI for the NRI Minister’s post?

NRIs are recognized & honored with Padma Bhushans by the Indian Government every year! Yet NRI policies are lacking in many aspects for a huge community of NRIs globally
NRIs are recognized & honored with Padma Bhushans by the Indian Government every year! Yet NRI policies are lacking in many aspects for a huge community of NRIs globally

Only an NRI can understand what it is to wait for hours in the Indian consulate. NRI’s have a hard time in the consulate offices be it to get a visa, PIO/OCI card and so on. The Indian diaspora from Africa to the Middle East, Europe and America are all interested in the outcome of the India Elections of 2014. One big hope for the NRI community are pro-NRI policies and getting truly represented for the problems faced by NRIs. And why not!

When it comes to actually streamlining regulations for people of Indian origin be where they may be located around the globe, the ministry certainly has a different idea on “action”. It is standard to hear that the regulations come from the home ministry. Then the home ministry has the external affairs to refer to. In a circle, you will probably hear about overseas affairs and it goes round and round. With all the promises from consular officials to simplify the rules, the NRI is usually tired of untangling a complex system. Yes, NRIs need a voice to represent them in India beyond the Pravasi Bhartiya Divas.NRIs

Only an NRI knows the confusion they go through trying to understand why they cannot come back to India for 3 months since a bizarre rule was put in place(now thankfully removed). Only an NRI worker knows what it is to be stranded in Libya when the Government falls and you are trying to get some help from the Indian consulate.

There are very qualified NRIs and India gives a bunch of them Padma Bhushans and other awards every year. How about giving one of them a Rajya Sabha seat and appointing them to represent the NRI community globally? The Government should resist handing over this ministry as the spoils of victory to party loyalists. Also in appointing the minister they should shy away from perceived regionalism. If they appoint a non-NRI and if they are from Kerala they will care for Middle East issues, if they are from Gujarat then US-India issues etc. How about finding a few NRIs who transcend regional issues and have a national and global perspective. Indians from any region of the country deserve a level of fair representation on their concerns not just yearly platitudes on how great they are and how much India values them etc. etc.

29 Million NRI’s deserve better!

Your thoughts are welcome.

Sanjay Puri

Sanjay Puri has been working on Indian-American issues and facilitating stronger US-India relations through USINPAC (US India Political Action Committee and AUSIB (Alliance for US India Business), two bipartisan organizations that he chairs.

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Jai Jawan Jai Kisaan—India has Agriculture Ministry for farmers but no Ministry for Veterans!

It is unfortunate that Indian soldiers dedicating their lives to military have noone to represent their problems independently- its time for a Ministry of Veteran affairs in India!
It is unfortunate that Indian soldiers dedicating their lives to military have noone to represent their problems independently- its time for a Ministry of Veteran affairs in India!

It is a season for every political party to pander to army soldiers and their families. They are lining up support by having retired leaders run for office like Gen. VK Singh for the BJP. Gen V K Singh’s manifesto is expected to include infrastructure and development of Ghaziabad, focusing on improvement of connectivity and transportation including widening of NH-24 and Metro line expansion. Yet it is surprising that there is no veterans affairs ministry in the manifesto!

While democracy can hardly be expected to work in operational or military matters; yet to me it is the call of all times! For the sake of policies affecting veteran pay, allowances, pension, disability benefits and general welfare that there needs to be a ministry for veteran affairs in India. Who else would know this better than veterans contesting this elections!

Recent history is a witness to the fact that be it the Ministry of Defence or the internal defense services, most of the problems crop up from the fact that the stake-holders have no say in the decision-making process, and power, or rather a voice, which has been concentrated in the chosen few. But veterans need someone to represent their issues!

With strength of over 1.3 million active personnel, India has the world’s 3rd largest military forces and the paramilitary forces stand at the 4th position with over 1,293,300 personnel along with the largest standing volunteer army in the world. While campaigning for votes with military personnel this elections seems to be all about photo ops, I wonder why don’t the army folks who are being wooed to vote for a party ask for something that should have been done a long time ago, have a Ministry on Veteran Affairs (whatever is the right name in India). They have created so many other ministries to take care of so many different constituencies like the tribal affairs, north-east affairs but not for veteran affairs.

Given that India is the only country to have fought 4 major wars in the past 60 years, it makes sense to dedicate a ministry that represents its soldiers beyond December 7—the Armed Forces Flag Day.

It all starts with a thought for your soldiers who risk their lives in odd weathers and tough terrains. They deserve respect— they deserve a Ministry for Veteran Affairs. Period.

Your thoughts are welcome.

Sanjay Puri

Sanjay Puri has been working on Indian-American issues and facilitating stronger US-India relations through USINPAC (US India Political Action Committee and AUSIB (Alliance for US India Business), two bipartisan organizations that he chairs.

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