Monsoon session: GST challenge ahead, again

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Bikky Khosla | 12 Jul, 2016
The Cabinet Committee on Parliamentary Affairs recently finalized the dates for the monsoon session of Parliament. It will be held from July 18 to August 12, and will have a total of 20 sittings over 26 days. Of late, there has been an increasing expectation that the arithmetic this time is in favour of the GST bill -- which seeks to create a uniform indirect tax system across the country -- fueled by an impressive victory of the BJP in the recent Assembly elections and the party's growing strength in the Upper House. Also, the government has made it clear that all efforts would be made this time, raising hope of passage of the bill.

It is a relief to see that even the Congress has hinted at dropping a key GST demand. Last week, a senior leader from the party said that they may not insist on capping the tax at 18 percent, one of the three major conditions it has put forward for the passage of the bill. I think the government should, in addition to reaching out the smaller regional parties, make the best effort to win over the Congress leaders' support on the bill. According to latest media reports, formal talks are likely to take place between the two sides shortly, and I hope something positive will come out soon.

Meanwhile, some positive news emerged for the economy last week. First, India Inc's first quarter revenue growth may see a two-year high growth rate of 8 percent. Second, the Plan Expenditure of the Centre reached a whopping Rs 90,000 crore in the first two months of the current fiscal. While private investment is not coming in as expected, it is a big relief that the ministries of rural development, agriculture, HRD, highways, railways and power have turned into big spenders. Third, tax collection in the first quarter has surged to Rs 3 lakh crore. These are indications that the economy is gradually gaining strength.

However, the lingering problem of bank NPAs has now emerged as the biggest challenge facing the economy today. According to a recent report by Morgan Stanley, Indian banks' NPA woes may linger through 2016-17. This finding is contrary to investor expectations. In addition, Moody's has viewed that Indian public sector banks will need a capital infusion of Rs 1.2 lakh crore by 2020, which is far higher than the additional Rs 45,000 crore planned by the government by 2018-19. It seems the NPA problem is far more deeper, and there must be a straining of every nerve by the Centre and the RBI to overcome it.

I invite your opinions.