Lack of political support delays India reform tax
Decision to discontinue parliament session throws April 2016 deadline into doubt
India's government has given up plans to reconvene a parliament session to secure approval for a common goods and services tax because of lack of political support, the finance minister said yesterday, making it harder to meet an April 2016 deadline to implement the reform.
The retreat came just as Prime Minister Narendra Modi's administration has been assuring an increasingly sceptical business community that Asia's third-largest economy can withstand global market turbulence and China's slowdown.
Finance Minister Arun Jaitley said a cabinet committee had recommended to President Pranab Mukherjee that he prorogue the monsoon session of parliament that had been kept alive since last month to allow for a consensus on the GST.
"There was a meeting of the cabinet committee on political affairs. It was decided to recommend the president to prorogue the monsoon session. We will keep trying, we are in touch with all political parties," Jaitley said.
The main opposition Congress party, which itself had pushed the tax legislation when it was in government, continued to play politics, Jaitley said, throwing into doubt the April deadline.
"Your guess is as good as mine," he shot back when asked if the government would be able to implement the tax measure.
"It is time for political parties to display some element of statesmanship, particularly when India is trying to emerge as an important economic force."
The government needs the support of the opposition to win parliament's approval as it lacks a majority in the upper house.
Business is clamouring for the GST, which would replace an array of state and federal levies and transform India into a more uniform market. Economists estimate that could add up to 2 percentage points to gross domestic product.
"It's massive. GST has to happen," Juvencio Maeztu, India chief executive for Swedish retailer Ikea, which buys wares from India but has yet to open any stores. "We cannot lose more time on this."
Fifteen months into Prime Minister Narendra Modi's term, officials are pushing hard to kick start an economy that remains sluggish, despite rosy official growth figures.
Modi met business leaders and economists on Tuesday to ask for investment; he was met with demands for trade protection and big cuts in interest rates to bolster growth.
