With limited legislative success in the Winter session of Parliament, the Narendra Modi government has adopted the ordinance route to push key economic reforms but that still leaves uncertainty on the table, experts from top global banks have said.
While using the ordinance route shows the government’s commitment to pushing through reforms, experts from HSBC and Nomura feel it is only a temporary route to changing laws.
Due to disturbances in Winter session, the Modi government’s reforms agenda hit a roadblock with Insurance Laws (Amendment) Bill, 2008 on raising the cap of foreign investment in insurance from 26 per cent to 49 per cent remaining pending despite being listed for consideration for several days.
The Coal Mines (Special Provisions) Bill, which provides for fresh auction of 204 coal blocks de-allocated by the Supreme Court in September because of a scam, also remained pending in the Upper House even though the Lok Sabha passed it on December 12.
“The ordinance route leaves uncertainty on the table,” HSBC Chief India Economist Pranjul Bhandari said in a research note adding “they may not be perceived as a stable solution by investors wanting secure property rights.”
The dominant theme in India’s winter parliament session saw “reforms through window when the door is shut” largely because the BJP is still in the minority in the upper house and could only resort to “imperfect measures”, Bhandari added.
Experts believe the ordinance route indicates the government’s seriousness on reforms and is likely to put the onus on the opposition, pressuring them to come on board sooner rather than later.
Though there is a lot that can be done in the short-term on the executive front even as the legislature goes slow. But, ultimately it is the legislative action, which is key for ushering in second generation reforms.
“The government will have to find a way to bring the opposition on board, so that critical legislative reforms such as the GST Constitutional Amendment Bill and changes to the Land Acquisition Laws can be passed in the budget session without further delays,” Japanese financial major Nomura’s India Economist Sonal Varma said in a research report.
For some bills (like coal and FDI in insurance), the Government chose the ordinance route, both of which were stuck in the Rajya Sabha (the upper house of parliament) in the recently concluded winter session of parliament.
Over the next several months, many key bills such as GST and possible amendments to the land acquisition law will be debated in the Parliament.
“Given that the deadlock in the upper house will likely persist, officials could fast-track reforms in three ways: outlining broad principles in bills, rather than specifics; incentivizing reforms at the State level, and trying to build consensus on a few, key laws,” HSBC’s Bhandari said in a report.