Prime Minister Narendra Modi after victory in UP elections, now revisits economic reform agenda to boost growth and Jobs.
Prime Minister Narendra Modi, fresh from his election victory in Uttar Pradesh, now has a chance to advance his economic reform agenda.
Surprisingly the voters in Uttar Pradesh supported the Bharatiya Janata Party(BJP) even after Modi’s decision on the note ban of Rs.500. Rs.100 notes. The party has won with the biggest majority for any party in the state since 1977.
The main purpose of demonetisation is to wipe out ‘black money’ – untaxed wealth and proceeds of corruption. The effects of demonetization mainly disrupted the common people for their daily needs where a large number of people used to wait for long hours in front of banks, ATMs for cash. However, voters handed Modi’s government, believing that the demonetization would pitch that the undeserving rich would suffer most.
Armed with a new mandate as a champion of the poor, Narendra Modi still faces a struggle to implement reforms to enhance the growth and jobs in Asia’s third-largest economy, say, professionals.
Following are the government’s reform Priorities:
GOODS AND SERVICES TAX:
The ministry of finance plans to implement the Goods and Services Tax (GST), India’s biggest-ever tax reform, from July.
There would be four different tax slabs of 5, 12, 18 and 28 percent, plus a charge on taxes on luxury items like cars, aerated drinks and tobacco products.
STATE OF PLAY:
The ministers of Central and state gave their final approval to legislation on Thursday. The administration hopes to win parliamentary backing in the existing session and by next month in state assemblies so that they would implement GST in the second quarter of the 2017/18 financial year.
The fresh tax structure will be revenue neutral and keep the rates that apply to companies in line with existing taxes. Still, it is expected to increase the rate of economic growth by 0.5 percentage.
Moreover, the finance minister, Arun Jaitley has told parliament the administration is considering a range of possibilities, while advisers say the focus will continue on using existing mechanisms to deal with bad loans. The approach has failed to achieve much headway until now, weakening state banks that are poorly placed to extend credit.
The central government and the Reserve Bank of India are still in talks on whether to set up a Public Sector Asset Rehabilitation Agency (PARA), or bad bank, to deal with stressed assets in the banking system.
Moreover, Jaitley has not been won over to the idea of a bad bank, a senior finance ministry official said. The banking division of the finance ministry also opposes such a move.
With the victory in UP elections, the Modi government wants to move forward with long-pending labour bills on wages and industrial relations. Bandaru Dattatreya, central Labour Minister has proposed boiling down 44 industrial laws into four different codes to simplify employment rules and increase social security benefits for workers.
Labour ministry officials say efforts continue to build an agreement, following a government decision to extend maternity leave to 26 weeks from 12 weeks. The measures may be introduced to the next session of parliament in July.