Thursday, February 6, 2014

India's Bold Pre-Poll Goals

India's government presides over its last parliament session before the mid-May general elections. Apart from the routine line-up of key bills, this winter session will also witness the tabling of its budget on February 17. Being an election year, the government will present a vote-on-account budget, instead of a full-fledged version. This covers the period between the end of this fiscal year and when the new administration assumes office, post-polls.

In the meantime, the government's ability to push ahead with about 30 bills remains to be seen. While these bills cover a wide range of subjects, from constitutional amendments and anti-corruption legislations to a controversial bill for the formation of a new state, there is unlikely to be any notable progress on the economically key Direct Taxes Code (DTC) and Goods & Services Tax (GST) bills. The latter two are important to overhaul the present taxation regime but have been deferred multiple times over the past few parliament sessions/budgets. The progress on the GST bill in particular has been hampered by the lack of consensus amongst the states, with the introduction of the single tax expected to simplify the structure by replacing varying and multiple tiers of state excise/indirect taxes with a single rate.

While the to-do list is long, broad expectations are that this session will face substantial disruptions and forced adjournments, especially as elections draw closer and political manoeuvring takes precedence. This played out on Wednesday as well. With expectations running low from this session, May elections are the next big event risk on the horizon. Three opinion polls conducted by different media houses last month put the opposition party Bharatiya Janata Party (BJP)-led coalition National Democratic Alliance (NDA) in the lead, followed by a weakened incumbent United Progressive Alliance (UPA). Notably, while all three surveys suggest that the opposition NDA will fare better, the "Others" group of parties has also gained significant ground. In the survey conducted by India Today, for instance, the "Others" group is expected to bag 48% of the vote share, higher than the NDA at 34% and UPA at 23%. This highlights the fragmented nature of the political backdrop and the growing importance that the regional parties could play in any potential coalition set-up. The new political outfit Aam Aadmi Party (AAP) is also expected to be a serious contender.