Now that India’s economy is reeling from Coronavirus, it seems that Rahul Gandhi wants to blame everything on GST. This is good political posturing in place of good economics. So I have two basic questions for Rahul Gandhi.
(1) If Rahul Gandhi was opposed to GST, why did the Congress Party vote in favor of GST in the Rajya Sabha in 2016 and 2017?
This was really not so long ago. But public memory can be short. So let me quote the news stories from 2016 that bear this out. This is from the Economic Times on Aug 4, 2016:
“The Constitution (122nd Amendment) Bill, 2014 was approved by the Rajya Sabha with 203 votes in favour and none against. The debate witnessed a rare bonhomie among the government and the opposition.”
Did you see that? Not a single vote was cast against the bill (the AIADMK walked out). All Congress members, present and voting, supported the bill.
The same unity was seen in the Rajya Sabha in 2017, when the government had to pass four pieces of enabling legislation to operationalize GST.
In fact, Jairam Ramesh said he wanted to move some amendments, but Dr. Singh personally asked him not to do so. If the Congress was opposed to the bill, why did they vote for it on the floor of the house? Twice!
(2) Why did the Congress miss the original GST deadline of April 1, 2010?
In his video, Rahul Gandhi boasts that there was something called “UPA’s GST” which would have done great things for the country. Unlike the NDA’s GST, which incidentally the Congress party voted for.
Okay, so why did the UPA not pass the GST Bill? They were in government, no? In fact, the first ever deadline for GST was set as April 1, 2010. This deadline was announced in the Budget speech on the floor of Parliament back in 2006. The Finance Minister was P Chidambaram.
From 2006 to 2014, the UPA had 8 full years. Why did they not pass the GST bill and unleash an era of milk and honey upon the nation, as Rahul Gandhi would have liked?
Here’s the thing. In every country in the world, GDP growth has taken a hit in the first two years after implementation of GST. The overhaul only bears fruit in the long haul. That’s why it is quite dangerous for a government to unleash this big reform. In fact, BJP made a record of sorts by becoming the first ruling government in the world to get re-elected after implementing GST.
And the Congress fully understands this point. It always did. In order to see this, look no further than the political code behind April 1, 2010, the GST deadline set by the Congress in 2006.
Why April 1, 2010? The General Election is supposed to be in 2009 and two things could have happened. Either Sonia ji’s govt gets re-elected or it doesn’t. If they lose, then it’s not their problem any more. If they win, they implement GST within the first year of their second term, so that the shocks subside in two years and the benefits become apparent before the next election in 2014. No way would UPA have passed GST between 2006 and 2009!
In fact, the political risks of Modi implementing GST in 2017, so close to the next election were apparent to all. You would remember the Congress in mid-2017, not opposing GST, but merely asking for another 3 month delay in implementing it. To push the peak of economic troubles as close to the election as possible. This did not go unnoticed among media commentators.
I quote from the ET article
“Let’s start with some facts. No government across the world has been re-elected after they implemented goods and service tax (GST). Not just that, the benefits of the GST were always reaped by the succeeding government.”
The thing is, GST was always an all party effort. The Congress fully participated in it. They just did not want any of the political risks of it.
You might remember that at the launch ceremony of GST in 2017, the government had invited every former Prime Minister of India to take part. Including, of course, Dr. Manmohan Singh.
But Dr. Singh did not attend. He might have told Jairam Ramesh not to move an amendment on the floor of the Rajya Sabha, when it really mattered. But when it came to taking responsibility, he was nowhere to be found.
That’s classic Dr. Singh for you. In PM Modi’s colorful analogy, wearing a raincoat in the shower.
Right at the time of the launch, PM Modi made it a point to state that this was not an achievement of one party or one government.
Indeed, it was an all party effort. And that’s even more true than you may realize.
As with most far reaching economic reforms in India, GST was first conceived by Vajpayee’s government, who in 2000 appointed the panel that drafted the basics of GST.
Who was heading that committee? You would be surprised. It was Asim Dasgupta, the Finance Minister in the then Communist government of Jyoti Basu in West Bengal. Indeed, Asim Dasgupta was the only CPIM member to attend the GST launch, despite his party announcing a boycott.
BJP, Congress, CPIM. All colors of the Indian political spectrum. Everyone came together to work on GST. But when it came to the implementation, there was only one man who was willing to take the political risk: Narendra Modi.
Yes, we were not adequately prepared for the pandemic. We were just wrapping up universal toilet coverage. We didn’t have time to build the healthcare infrastructure to hold off a pandemic that has brought the United States and France (ranked #1 in healthcare by WHO) to their knees. Without the pandemic, this would have been the year of the rebound.
PM Modi took a big political risk in 2017. It paid off. Turns out the risk was even bigger than we imagined. He is in the thick of it now, facing the thundershowers. One thing I can assure you. He’s not wearing a raincoat. History will decide in 2024.