Modi govt at 9: As 2nd innings nears close, some unfinished business

As the Narendra Modi government enters the final year of its second term, here's a look at some projects that are hanging fire

On September 23, 2020, when Parliament passed three labour reform Bills to replace 29 existing labour laws, amid a boycott by the Opposition parties, Prime Minister Narendra Modi hailed the “futuristic legislation” that would ensure workers’ well-being, reduce compliance burden and boost economic growth.

Nearly three years later, the reform remains on the back burner amid opposition from labour unions and many state governments. As the Narendra Modi government enters the final year of its second term in office, it has little time left to complete its unfinished agenda.

Amit Basole, a professor at the Azim Premji University, says the cobweb of existing labour regulations necessitated these codes. However, the government has to walk a tightrope between entrepreneurs’ need for a flexible regime and workers’ welfare.

“These [labour codes] should have addressed the issue of contractualisation and other concerns of workers more effectively. Since labour is a concurrent subject, it will take a lot of effort to bring all states and stakeholders on the same page. It is unlikely that the labour codes will see the light of the day until general elections next year. Besides, for these codes to be effective in boosting growth and employment, the government has to also bring other reforms in taxation, infrastructure, trade policies, etc,” he adds.

A key indirect tax reform that remains pending is Goods and Services Tax (GST) rate rationalisation. A committee under then Karnataka chief minister Basavaraj Bommai could not submit its final report due to a government change in that state. The committee now needs to be reconstituted. Also pending are provisions related to capital gains in a complex web of different rates, holding periods of assets, and conditional exemptions.

On the ‘ease of doing business’ front, the government seeks to reduce tax compliance hassles. However, the provisions and compliance for tax deducted at source (TDS) and tax collected at source (TCS) have risen drastically. “Withholding tax provisions have become complex and the burden of ensuring effective tax collection has been offloaded on taxpayers. A much simpler TDS and TCS regime is required with very few moderate rates (from 2-10 per cent), says Sudhir Kapadia, national tax partner, EY India.

The Insolvency and Bankruptcy Code (IBC) has been one of the landmark legislation brought by the Modi government. IBC has undergone many changes to keep up with stakeholders’ requirement, but several issues — from individual to cross-border insolvency — remain. The corporate affairs ministry is now working on a new IBC Bill to give more powers to the National Company Law Tribunal, besides several other changes.

While the government succeeded in a mega merger of public-sector banks (PSBs), with 10 PSBs being folded into four, governance reforms continue to elude these banks. The government has so far not given up appointing chief executives of PSBs. The P J Nayak committee had recommended that the board of such banks be empowered in a phased approach to make such appointments. The panel had also suggested bringing down the government stake in PSBs and amending several laws to level their playing field with private-sector peers.

In her 2021-22 Budget, Finance Minister Nirmala Sitharaman had announced that two state-run banks would be privatised. With disinvestments taking a back seat in the pre-election year, the privatisation plan looks shelved for now.

The government also had to roll back its plan for Bharat Petroleum Corporation (BPCL) disinvestment as it drew little interest. The merger talks between sick state-run telecom companies Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) — on for over 15 years now — also remain unfinished. The companies have not been able to match the intense competition from private telecom peers, and their dwindling finances, different employee pay structures, and union protests, have prevented their merger. A group of ministers had proposed dropping the proposal in 2021, but the talks are still open.

After shedding its initial inhibition about signing free-trade agreements, the government concluded trade deals with the United Arab Emirates and Australia in record time. But a much more ambitious deal with the UK, which was scheduled to be completed by Diwali last year, is still pending. Talks with Canada and the European Union have also made slow progress.

Another of the government ambitious targets was doubling farmers’ income by 2022-23. A high-powered panel constituted under former bureaucrat Ashok Dalwai had said farmers’ income needed to grow by 10.4 per cent between 2015-16 and 2022-23 in real terms (inflation-adjusted), not nominally. However, the last situational assessment survey of the National Sample Survey Office (NSSO), released in 2021, showed average annual income growth of just 3.5 per cent in real terms.

The government originally aimed to make India a $5-trillion economy by 2024, but Chief Economic Advisor V Anantha Nageswaran has now projected that the economy will achieve the target by 2025-26, depending on exchange-rate fluctuations. CRISIL recently said the target could be achieved only by 2028-29.

On the infrastructure front, some of the government’s flagship projects continue to be delayed. India’s key highway development programme, the Rs 5-trillion Bharatmala Pariyojana, has already missed its first-phase deadline of 2022, and, according to a report by rating agency ICRA, it is likely to be delayed by six years. Meanwhile, the highways ministry’s internal estimates project that Bharatmala’s cost has doubled to over Rs 10 trillion due to the delays.

In railways, there have been significant delays in the Mumbai-Ahmedabad bullet train project, which was initially expected to be launched in 2022. Today, the Centre is looking at a minimum four-year delay in the project, with operations expected only around 2027, or later.

(With inputs from Asit Ranjan Mishra, Shiva Rajora, Shrimi Choudhary, Ruchika Chitravanshi, Manojit Saha, Subhayan Chakraborty, Sanjeeb Mukherjee, Dhruvaksh Saha and Sourabh Lele)