If Narendra Modi fails to get the economy moving in the four years that are left in his tenure, it will be because he has chosen the wrong battles to fight on the wrong turf. Given the build-up of political opposition to his government (over the Lalit Modi affair and other issues), there is more than a fair chance that two major reform bills – the goods and services tax (GST) and the Land Acquisition Bill – will not pass in the remaining months of 2015, and certainly not during the monsoon session of parliament starting on 21 July.
The GST bill, now with the Rajya Sabha, and the land bill, now being discussed by a joint select committee of both houses of parliament, will be opposed tooth and nail by the Congress party and some regional parties. Given the NDA’s low seat position in the Rajya Sabha, there is not a snowball’s chance in hell it can get either of them through.
Of the two, the GST bill in its current form (where the tax rate may be 25 percent plus ) is not worth passing. The land bill is worth passing, but won’t be because the opposition will neither pass it nor reject it in the Rajya Sabha. If the bill is merely bottled up in the Rajya Sabha, there is no way the government can even think of calling a joint session of parliament to get it passed. A joint session can’t be called unless one house modifies or rejects a bill passed by the other house. This is precisely what the opposition will not do (Read what Sitaram Yechury has said here). It will sit tight, neither saying yes or no.
Narendra Modi’s economic think tank has got its strategy wrong on both bills for the simple reason that they militate against federalism. The GST bill is being opposed for opportunistic reasons by the Congress, but the real opposition comes from states which do not want to cede all revenue flexibility by throwing lucrative revenue sources into the GST pot. By keeping out alcohol and tobacco, and possibly some other taxes, the resultant GST rate will be too high to be viable. It will slow down the economy further as services, which account for 60 percent of the economy, will bear the brunt of the new tax. This is not the best way to revive growth.
The right strategy for the Modi government on GST is to slow things down and come up with a better bill when the time is ripe. Better still, it should ask the Congress to help completely rework the bill along with the regional parties and recommend appropriate changes for passing. Any changes in the NDA version of the GST bill can only be for the better. By taking the Congress’s objections on board the NDA earns brownie points for consulting the opposition and improving the bill. Of course, the Congress may not help, but in that case it will be shown to be a mere spoiler, and not a conscientious objector to the bill’s bad provisions.
On the land bill, where a coalition of interests, including the Congress and JD(U), and elements in the Sangh parivar are themselves against, the Modi government has made a strategic error. By talking of a joint session, it has effectively shown the opposition the right way to stall the bill. Moreover, it has taken on too many forces together at the wrong time. If the bill had been brought up last year soon after the Lok Sabha elections, it could have squeaked through; today, the political climate simply isn’t right for it.
Moreover, the government is actually trying correct the UPA’s over-reach in a joint legislative domain (land can be legislated on by both centre and states) by another central over-reach. The UPA discarded federalism and imposed a law on states that they largely did not want; the Modi government is trying to do the same in order to help states, but is politically stymied because all parties favour landed interests over the landless and the poor. Most rural MPs are linked to landed interests, and they are all together in it to tweak the land law to their advantage, even if it is anti-development.
As is obvious, bad laws are tough to roll back since there are too many vested interests benefiting from them.
The only way Modi can attempt to checkmate the opposition is by going back to the idea of federalism.
In case the land bill is bottled up in the Rajya Sabha – and there is an assessment that it can’t be passed this year – Modi simply needs to make it clear that henceforth states can legislate their own land laws, and his government will allow those laws to supersede the UPA’s land law. It should also make it clear that if land acquisitions suffer, the Congress law is responsible. Rajasthan and Madhya Pradesh have attempted changes to the land laws, and they should be okayed by the Centre.
Under section 254(2) of the constitution, any state law that is different from a central law can be given precedence in that state if the Centre agrees. The clause says: “(2) Where a law made by the legislature of a state with respect to one of the matters enumerated in the concurrent list contains any provision repugnant to the provisions of an earlier law made by Parliament or an existing law with respect to that matter, then, the law so made by the legislature of such state shall, if it has been reserved for the consideration of the President and has received his assent, prevail in that state: provided that nothing in this clause shall prevent Parliament from enacting at any time any law with respect to the same matter, including a law adding to, amending, varying or repealing the law so made by the legislature of the state.”
While Modi works on a new law to undo the damage done by the UPA’s land law, he should clearly announce that all state laws on land acquisition will be given the president’s nod without much ado.
This will help some states overcome the inertia imposed on them by the UPA law, but over the long term, even the central law will need change. NDA can retreat to fight another day – possibly in 2016, when the Rajya Sabha numbers will be a little more favourable to it.