Given the heavy legislative agenda, Prime Minister Narendra Modi would do well to walk the extra mile to get the Opposition to work with him. Without this, the next few Parliament sessions could well be a washout, and there will be little question of either the GST or the bankruptcy law getting through – the latter is critical to help banks recover dodgy loans. If Modi does not get the Opposition to work with him, the chances of being isolated again as in Bihar will also increase. Even if you leave aside the Opposition clamour to get Modi to sack ministers who added to communal tension, there is plenty of common ground for reforms. On GST, now that the government has agreed to full compensation to states, it should accept the Congress demand to scrap the 1% tax on inter-state sales – this was, after all, introduced to placate states who feared a loss of revenues post-GST.
But even without legislative support, there is plenty for the BJP to do should it decide to push on the reforms agenda. Unifying central excise and service tax into a central GST requires no legislative approval, but will serve as a template for the eventual national GST. A central GST will, for instance, force the government to come out with a workable threshold for taxation where there is no revenue loss while keeping as many firms as possible away from the inspector raj – the threshold for excise is a turnover of Rs 1.5 crore while that for service tax is Rs 10 lakh; working out a revenue-neutral-rate will also save time when the national GST is rolled out. Similarly, working on making the taxman less trigger happy and burying legacy cases doesn’t require the Opposition’s cooperation – Modi did well to announce, last week, that he planned to include the success rate of tax officials in their appraisal; judging officials on this yardstick will dissuade them from issuing high-value tax notices for the sake of doing so. The power reforms announced last week involved very rigorous monitoring, but only by the executive; ditto for increasing capital expenditure on roads and railways, for pushing defence contracts, getting BJP-ruled states to pass friendly labour and land laws … How the government reacts depends on whether it sees the Bihar defeat as purely the arithmetical result of a Nitish Kumar and a Lalu Yadav tying up or whether it sees this as a compelling reason for it to have a solid jobs- and growth-based counter-narrative.