 "ATM, banks, cash, currency, rupee, demonetisation")
The Modi government had promised to take a different course than its predecessors when it came to governing the country and setting in place policies that would take the nation on a new path.
The year 2016 did see critical policy decisions being made, and some being implemented, though the final outcome of all of them is not known yet.
From far-reaching decisions such as demonetisation, to the passing of the Goods and Services Tax (GST) Constitutional Amendment Bill, the year gone by will have significant consequences for the Indian economy and the nation as a whole.
Here are the five most crucial policy decisions of 2016:
1) Demonetisation: Perhaps the largest and unlooked for policy decision by the current government came on November 8 this year when Prime Minister Narendra Modi addressed the nation and announced that the then existing 500- and 1,000-rupee notes would cease to be legal tender from that very midnight onwards. Instead, the government brought in a new series of 2,000- and 500-rupee notes, both of which would be a long time coming for the people who lined up at ATMs or outside banks for hours at an end, day after day. The decision and its suddenness were purportedly meant to tackle the menace of ‘black money’ in the country. However, despite the enthusiasm among at least a certain section of the populace, what followed was an exercise in patience as the government issued new rules, restrictions, relaxations and pertinent dates nearly on a daily basis. As of December 21, the government had introduced as many as 60 notifications on the issue in the 43 days since demonetisation was announced (Click here to read the story). From the limit on exchanging specified bank notes being revised down to Rs 2,000 from the earlier limit of Rs 4,000, to the notification requiring banks to mark people who came in to exchange their old notes with indelible ink, once the demonetisation drive was in place, the barrage of additional rules never stopped. Further, the government also changed its narrative midway into its drive, with the purported focus of the move shifting from tackling black money to promoting Digital India and a cashless economy.
With regard to whether there is enough currency available with the people more than a month after the drive began, as on December 22, according to the Reserve Bank of India (RBI), banks had issued currency worth over Rs 5.92 lakh crore to the public since the demonetisation drive began (Click here to read the story). However, the currency infused into the system is much less than what has been deposited in the form of defunct notes. The old 500- and 1,000-rupee notes returned to RBI and currency chests amounted to Rs 12.44 lakh crore as on December 10.
The long-term impact on the economy from this move is yet to be fully estimated. However, as far as its originally stated purpose is concerned, it might not have made much of a dent. Writing for Business Standard, A K Bhattacharya explains: "The move to demonetise the old currency denominations of Rs 500 and Rs 1,000 will tackle the stock of black money, but not its future generation or the flow." Further, he argues that tackling black money would require a slew of changes in the taxation system and reform in election funding, among other things. (Click here to read the column)
2) Real Estate (Regulation and Development) Act, 2016: In March this year, the Parliament passed the Real Estate (Regulation and Development) Bill, 2013. The Bill seeks to create a set of rights and obligations for both the consumers and developers, according to an official statement (Click here to read the story).
Under the Act, the central and the state governments must establish a Real Estate Regulatory Authority within one year of the proposed Act coming into force. Each government could establish one or more authority within a state or Union territory. If they deem fit, two or more states or Union territories could establish a common regulator.
It has made it mandatory for developers to set aside 70 per cent of the sales proceeds from a project in an escrow account, which will make any diversion of the money difficult. Also, builders will need compulsory approvals prior to launching projects, with the regulatory authority being bound to grant registration to a project within 30 days of receipt of an application provided it meets the rules. At the time of the Bill's passing, Minister of Housing and Urban Poverty Alleviation Venkaiah Naidu had clarified that existing and ongoing projects, however, would not come to a standstill. In an ongoing project, the promoter has to apply for registration within three months of commencement. Further, the developers and buyers will be paying the same interest rate on defaults.
It makes it mandatory for all residential and commercial projects to register with the regulator and will apply to new and ongoing projects. Appellate Tribunals will now be required to adjudicate cases in 60 days as against the earlier provision of 90 days and regulatory authorities will have to dispose of complaints in 60 days. In the earlier Bill, no time frame was indicated. The Act provides for imprisonment of up to three years in case of promoters and up to one year in case of real estate agents and buyers for any violation of orders of Appellate Tribunals or monetary penalties or both. The mandatory registration for projects has been brought down to 500 sq m area, or those comprising eight flats. It also provides for a clear definition of carpet area and a system that would require the consent of two-thirds of the buyers in case there are changes in project plans.
ALSO READ: Decoding the real estate Bill
3) Goods and Services Tax (GST) Constitutional Amendment Bill: In August this year, the Rajya Sabha finally passed the GST Constitutional Amendment Bill, which had been passed by the Lok Sabha the previous year. GST will be a comprehensive nationwide indirect tax on the manufacture, sale and consumption of goods and services throughout India. The aim is to have one indirect tax for the whole nation, which will make India a unified common market. GST will be levied and collected at each stage of sale or purchase of goods or services based on the input tax credit method and would make not just manufacturing but also the inter-state transportation of goods more efficient. Amalgamating several central and state taxes into a single tax will mitigate cascading or double taxation, facilitating a common national market. This would be hugely beneficial for consumers as the tax burden on inter-state logistics will be cheaper. A common tax would mean easy compliance and uniformity of tax rates and structures for industry and would thus contribute to ease of doing business by removing cascading costs.
ALSO READ: All you need to know about the GST Constitution Amendment Bill
However, the April 1, 2017, rollout of the new tax regime looks nearly impossible at the moment, with GST Council having postponed the discussion on the critical issue of administration and control of tax payers. Even so, the council has already cleared most of the draft model GST Bill (Click here to read the story).
ALSO READ: Modi govt adds many feathers in its reforms cap in 2016, but more to go
4) Aadhaar (Targeted Delivery of Financial and other Subsidies, benefits and services) Act, 2016: In March this year, the Parliament approved the Aadhaar Bill, which had been tabled in Parliament as a money bill. Later in the month, the government notified the act. (Click here to read the story) The Act gives the identification numbers assigned by it a statutory backing for transfer of subsidies and benefits to people eligible for them. In a rare instance of not renaming or tinkering with a legislation pioneered by a previous government, the Aadhaar Bill that the Modi government introduced in the Lok Sabha as a money Bill was wholly adopted from its predecessor United Progressive Alliance's version. An estimated expenditure of Rs 13,663.22 crore has been approved for implementing the Aadhaar scheme till 2016-17 (Click here to read the story).
Further, in July this year, the government announced that all Direct Benefit Transfers (DBT) would be linked to Aadhaar by the end of 2016. While setting the ambitious target, the Centre also decided to bring all subsidies and welfare schemes under the DBT net by March 31, 2017. As of July this year, benefits under 74 schemes of 17 ministries are being provided to the targeted people through DBT (Click here to read the story).
Also, in late November, the government announced that the production of an Aadhaar Card would not be a condition for citizens to obtain any benefit due to them. This was in keeping with the Supreme Court's order on the matter. Instead, in compliance with the Act, if an individual has not been assigned an Aadhaar number then he or she shall be offered alternate and viable means of identification for delivery of the subsidies, benefits or services (Click here to read the story).
The government is also working on developing a common mobile phone app that can be used by shopkeepers and merchants for receiving Aadhaar-enabled payments bypassing credit and debit cards, pin and password (Click here to read the story).
As of April 2016, the Unique Identification Authority of India had generated the 100 crore Aadhaar cards, touching the landmark in a span of five-and-a-half years since the first Aadhaar was issued in 2010. At that time, Aadhaar coverage stood at 93 per cent among people above the age of 18 (Click here to read the Press Information Bureau notification).
5) Bankruptcy Code: In May this year, the Insolvency and Bankruptcy Code Bill, which enabled a single law to deal with distressed companies, their promoters, creditors, employees and other stakeholders for the first time in India, was passed by both houses of the Parliament (Click here to read the story).
The law will ensure a time-bound process of winding-up a company or limited liability entity, a 'Fresh Start' for debt-laden individuals under a certain threshold and temporary transfer of management of the troubled entity into the hands of resolution professionals. In a relief for banks, the law is expected to help lending institutions in dealing with about Rs 8 lakh crore of stressed assets and streamline the existing insolvency process, which previously depended on 11 separate laws. The law repealed the Presidency Towns Insolvency Act, 1909, and Provincial Insolvency Act, 1920. In addition, it amended laws such as the Companies Act, 2013, and the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, among others.
As part of implementing the Code, the government has already constituted the Insolvency and Bankruptcy Board of India. Further, the government expects the Insolvency and Bankruptcy Law to become operational by end-December, 2016.
Similarly, the Enforcement of the Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, which was passed this year and amended four key laws, including the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act of 2002 and the Recovery of Debts due to Banks and Financial Institutions Act of 1993, is expected to help banks in the case of loan default.
Click here to read a snapshot of the The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016.
6) Advancing Budget date: In November this year, the government announced that the Budget date has been finalised as February 1, though a formal confirmation is awaited from the Cabinet Committee on Economic Affairs (Click here to read the story).
Two other major changes were also brought in. In September, the Union Cabinet had approved the merger of the Railway and General Budgets from 2017-18, ending a 92-year-old colonial tradition (Click here to read the story). Further, it also cleared abolishing the classification of Plan and non-Plan expenditure in the Budget. The government wants the Finance Bill to be passed before April 1.
