GST on the way, Labor Reforms on the Anvil!

This article has been written by Amrit K.N. Pradhan. Amrit is a student at Rajiv Gandhi National University of Law, Patiala.

“Precaution is better than cure” – Johann Wolfgang von Goethe.

I have probably heard this fable more than ever in my lifetime, it looks like the trend will continue. It certainly puts my parents and my sister on the brink. I apologise to them.

Changing tracks…

Since the inception of NDA-II under the reigns of PM Modi the business environment has certainly made headway. The World Bank Group’s “Ease of doing Business” (an index which measures the regulations and protections offered by a country.)deserves a healthy share of the pie. The fable has been so much in vogue that now a provincial version of it has been ‘manufactured’.

The first major instance, where NDA-II tried to make its mark in promoting a conducive business environment was by introducing The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Bill, 2015. The bill created five special categories which were exempted from taking consent from 80% of land owners (70% in case of PPP.), a tumultuous process. They were defence, rural infrastructure, affordable housing, industrial corridors and infrastructure projects including public private partnerships where the government is the owner of the land.

The process was a certain hindrance in fast-tracking business investments and projects in the country. The Government in power passed the muster easily in Lok Sabha but same was not the case in the Rajya Sabha, where it did not have a majority like it had in Lok Sabha. It passed ordinances under Article 123 of the Indian Constitution several no. of times, in the meantime they tried to garner the required votes to pass the bill. Unfortunately for Indian economy and business environment, the time gained through promulgation of ordinances garnered zero returns.

Remember, your debut class in economics where one of the first things you learned or noticed that Land, Labour and Capital are the basic factors of production. So, NDA-II also noticed the basic need to make the land acquisition process easier and quicker to have an able base to setup businesses in the country and take the country on the path of “Development and Job Creation” (a plank on which PM Modi won the Elections 2014.). But, it failed.

Next basic thing is Labour. You can criticize them for skipping it prima facie. For a moment, if I tell you it was a wise political move to not to escape the bad impression in the eyes of the general public which LARR Bill had created and jump on easing the capital flow. Then, I am sure the criticism would be repudiated.

The Government eased the capital flows by making it easier for sectoral firms to utilize and attract foreign investment through FDI. SEBI chipped in by easing the regulation environment for FIIs or Foreign Institutional Investors. GST was part of easing the Capital flow, it faced hurdles but ultimately it passed the muster. Fingers crossed! by April 1, 2017 hopefully we will contribute to the governance process by paying our fair share legally under the GST or Goods and Services Tax.

Looks like the script of ‘one single nation, one single tax’ will be played around with to account for four slabs of 6%, 12%, 18% and 26%. I am on the cusp of reading and learning through Emeritus Fellow of Merton College, Oxford economist Vijay Joshi’s latest writing, India’s Long Road – The Search for Prosperity. It has gone quarter of way in appreciating the current reign of PM Modi. However, it also points out frailties in Labour, divestment of governmental stakes in PSUs, vicious tax evasion and India’s reticence in joining the free-trade agreements currently being negotiated throughout the world are some of the lucid pointers which needs quick appraisal for the current government to grow at a rate near to 8% to fulfil the promises of “Economic Development and Job creation”.

First of those suggested by Vijay Joshi, who has been the Special Advisor to Ministry of Finance as well as Governor, Reserve Bank of India is planning to be dealt with by Team Modi & Co. The work had begun when the current government took over in May, 2014 to amalgamate and cull down the various Acts into as few and updated as possible. As per sources, they have been trimmed into four Labour Codes underlining Labour, Industrial Relations, Social Security plus Industrial and Safety Welfare.

The Labour Code underwrites Minimum Wage Act, 1948 as the parameter for wages. The Industrial Code restricts formation of a trade union. Social Security amalgamates 6 acts into one code, Industrial Safety and Welfare does the same with three underlying acts.

This should up the ante of India in World Bank’s Ease of Doing Business Index 2017. Rankings apart, on the ground applicability of the law will be crucial to ‘Ease of Doing Business’.


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