The parliament winter session (the decisive one) commenced on the 26th Nov, 2015. Parliament will hold the meet till December 23rd, 2015. The session agenda includes 19 Bills currently pending in Parliament for consideration and passage (including the GST Bill). 14 new Bills are proposed to be introduced. Out of these one will also be taken up for consideration and passing. Two Bills will be withdrawn. With a fairly stable signals so far, the winter session productivity does seem to be significant with close to 73% productivity. In this blog, we will focus on the productivity of upper house and the lower house in terms of results as well as the time spent. We will also focus on GST and the progress so far including the Arvind Subramanian committee recommendations. Finally, I will also conclude with the likely outcomes of the session, its effects on the GDP growth and the direction of the markets in the medium term.
For the readers, here’s what I discussed about GST in detail in one of my previous blogs:
Lets first understand the major bills that will be due for discussion in the session. Here’s is a brief note on the same.
The productivity of the sessions has been a significant driver of the reforms and development in India. However, history suggests that no session of the rajya sabha apart from the budget session has been productive. In the NDA Govt tenor as well the history has repeated itself with low productivity in the monsoon session. GST has been facing strong opposition for the structure of the bill. To get a sense of the productivity and performance against the plan, here are a few images that might help to give a clearer picture.
While productivity has been one of the issues, the strong opposition to the GST passage is still a concern for the NDA Govt. GST has been facing an opposition in terms of the structure, exclusions and inter-state tax. With 3 committees already publishing their recommendations, opposition was persistent with their demands. NDA Govt thence decided to form a committee headed by the Arvind Subramanian(Chief Economic Advisor to the PM). The key recommendations of the CEA led committee were:
a) Recommends eliminating all taxes on inter-state trade.
b) GST panel has suggested standard rate of 17-18%
c) Panel not for specifying GST rate in Constitutional Amendment Bill
d) Panel recommends bringing alcohol, petroleum within GST
e) Committee suggests revenue neutral rate of 15-15.5% for GST
f) Allocation to states will depend on revenues raised by Centre and states
g) Two options for the states: Single rate of 15% or a range of 17-18%
h) GST rate on precious metals to be in the range of 2-6%
i) Panel recommended removal of 1% additional levy
j) Higher GST rates on tobacco, luxury cars, pan masala and aerated drinks
k) The panel kept alcohol, real estate out of GST to achieve 15% rate
The NDA Govt will now be again presenting the GST bill with the required changes if they accept the CEA recommendations. If the NDA Govt succeeds in putting up a viable solution for the oppositions demands, it would truly make GST, one of the biggest reforms since independence in India. Although, the hopes are slightly on the lower side, things might change from here on if a mutual motive is maintained. The silver lining of the winter session was the passage of the Real Estate Regulatory Bill (2015) today, which is intended towards consumer protection and might be a way to maintain the market dynamics in this era of sky high real estate prices. One of my blogs might give readers a fair idea about the Real Estate Regulatory Bill.
To conclude, the path towards the GST passage looks rough for the NDA Govt so far. It might be right to say that the winter session might not give be able to deliver the said reforms. The non passage of GST will definitely be a huge setback for the Govt and might affect the GDP in the coming future due to the leading weak investment sentiments. On the other hand, markets with significantly low hopes about the GST passage, might head south in the medium term (Uptil the first quarter of FY 2016. Markets look volatile in the short term and might continue to be the same at least, till the US Fed meet due on the 15th of this month. Markets will be looking forward to the Budget session for a push in the reforms from here on, if at all the winter session turns out to be an unproductive one. It would be the appropriate time to move things forward in terms of reforms and use the current conditions of low commodity prices to our benefit.I hope, the Center and the opposition will start putting up a few actionable steps in place for the betterment of the economy on a macro level, rather than hinting a political vendetta.
Thank you. 🙂