The Indian Parliament’s Monsoon Session: What Is Going to Happen?
By Dezan Shira & Associates
Editor: Aakash Shah
After more than one year into Prime Minister Narendra Modi’s term, the political landscape looks decidedly less optimistic than it did in the immediate aftermath of Modi’s election. The Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) coalition had hoped to pass several bills to support the government’s economic plans during the Monsoon Session of Parliament between July 21 and August 13. However, the NDA’s legislative agenda has been compromised by political mudslinging and a string of scandals.
Legislative Agenda Compromised
Initially, the BJP planned to pass a variety of bills designed to improve business conditions in India. The Goods and Services Tax (GST) and land acquisition reforms are two of the ruling party’s highest priorities, but the BJP and the NDA had also wanted to pass bills addressing corruption, real estate and child labor, amongst others. While the government is working to amend the GST Bill for its passage through parliament, the government’s other priorities appear compromised at present.
The so-called Vyapam Scam, a case of mass-bribery involving government officials, in Madhya Pradesh state, where the BJP holds power, has scandalized Indian politics. The authorities have arrested an estimated 2,000 people connected to the scam, which is alleged to have led to the mysterious deaths of at least 35 people. Separately, the opposition Indian National Congress (or Congress) has pledged to block any legislative progress during the Monsoon Session unless Minister for External Affairs Sushma Swaraj resigns for aid she allegedly provided fugitive Lalit Modi, who was implicated in a high-profile corruption case.
To make any progress with its legislative agenda, the BJP-led NDA coalition needs to muster some political capital fast. Even though the NDA coalition holds a majority in the Lok Sabha (the Lower House of Parliament), the opposition Congress-led United Progressive Alliance (UPA) coalition holds a majority in the Rajya Sabha (Upper House of Parliament). The NDA coalition will likely find a way to pass some of its bills, but this Monsoon Session is unlikely to be as successful as the Budget Session of Parliament held earlier this year.
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The Top Bills
Goods and Services Tax
The GST Bill is the government’s highest priority for the Monsoon Session. Currently, India’s indirect tax system is managed at both federal and state levels of government, complicating the ease of both business and governance. If passed, the GST will centralize a number of federal and state taxes, which will make compliance easier for businesses and is projected to increase tax revenue substantially. Popular Finance Minister Arun Jaitely has pressed legislators to pass the bill, while the Finance Ministry is currently amending the bill for parliament.
The GST Bill is the most likely to clear parliament during the Monsoon Session. The GST is needed to boost domestic revenue and does not face the same level of opposition as other bills. The Modi administration and the BJP have invested most of their political capital into passing the GST Bill; the government had planned to make the GST effective from April 2016. A failure to pass the GST Bill during the Monsoon Session will weaken investors’ confidence in Indian governance. Given these stakes, the NDA and UPA may compromise to pass the GST and save face, while continuing to lock horns over more controversial bills.
The most controversial bill proposed by the BJP is the Land Acquisition Bill. The bill would require 70 percent of local landowners to consent to the sale of land for government purposes and 80 percent for private purposes. However, under the bill, consent is not needed if the land will be used for defense, rural infrastructure, affordable housing, industrial corridors and infrastructure or Public Private Partnerships (PPPs). The bill also reduces the timeframe for land acquisition from 50 months to 42 months, which will help improve India’s ease of doing business rankings.
Land acquisition reforms are critical for the success of a number of the government’s key initiatives, such as the ‘Smart City’ plan, designed to develop urban spaces in India, and the ‘Make in India’ initiative, designed to promote manufacturing in India. However, the government has failed to create public support for land acquisition reforms. The opposition – including Congress, Aam Aadmi Party and many others – is united against the bill.
As the NDA has not made much progress with its priority GST Bill, it appears increasingly unlikely that the Land Acquisition Bill will pass through parliament. Despite reported amendments to the Land Acquisition Bill to make it more palatable to the opposition, the UPA majority in the Rajya Sabha has little incentive to pass a bill they have called ‘anti-farmer’. Modi previously passed land acquisition reforms by executive order, known locally as an ‘ordinance’, and may have to again if he would like to preserve his administration’s land acquisition policy.
Real Estate Reform
Real estate fraud and mismanagement are issues that plague investors in India. The misappropriation of funds and shoddy, prolonged construction projects have driven many investors away from India’s potentially lucrative real estate industry. The Real Estate Bill seeks to address these concerns by creating a regulator that will enforce compliance and transparency.
The bill will require developers to register with a regulator, and will compel developers to seek approval for building plans and timelines. Although amendments are currently under discussion by legislators, the bill will also mandate that developers use a percentage of project revenue on the project itself, instead of diverting financing to other projects.
Although the Real Estate Bill is not excessively controversial, it is possible that this low priority bill will fail to pass parliament as a result of partisan politics. The NDA and UPA will need to establish a degree of bi-partisanship that has not yet been demonstrated to make this constructive bill law.
Child Labor Reform
Child labor is pervasive in India. The Child Labor Bill plans to reform laws to ban the employment of children under the age of 14 years old, with an exception for children under the age of 14 who are working for family businesses. At present, children under the age of 14 are only banned from working in certain hazardous industries. The bill also increases penalties for those illegally employing children, and grants authorities increased power to inspect places where adolescents between 14 and 18 years old work.
If passed, the bill will harmonize the Child Labor Act with the Right to Education Act, which makes education compulsory for all children up to age 14. However, the Child Labor Bill has faced some opposition due to its provisions for children working for family businesses, and its allowances for employing adolescents aged 14 to 18 years. As with the Real Estate Bill, the NDA and UPA will need to muster some bi-partisanship to amend this bill and pass it through parliament.
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Two Steps Forward, One Step Back
The outcome of the Monsoon Session is ultimately dependent on the ability of the NDA and UPA to negotiate comprises on reforms that are critical to India’s development. At present, it does not appear that the Monsoon Session will be as productive as recent parliamentary sessions.
International Business Advisory Manager Adam Pitman notes that “despite a historic mandate from the electorate last year, Modi has not built the bi-partisan consensus needed to enact many of the reforms his administration designed to strengthen the economy. Modi and the NDA will continue to effect meaningful reforms, but is unlikely to make the amount of progress forecast by the international media”. Although the government has scored some important legislative wins this year, Pitman described the government’s record as “two steps forward, one step back”.
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