GST, other key reforms likely to face setback

Prime Minister Narendra Modi’s push to bring in crucial economic reforms like the Goods and Services Tax is likely to get more difficult after the BJP’s defeat in the Bihar elections, despite recent calls by leading business leaders like Kiran Mazumdar Shaw for the government to focus on its economic agenda.

Many analysts also expect the BJP’s loss in Bihar to hit stockmarkets in the short term due to worries over delays in economic reforms.

With the Opposition buoyant after its victory in Bihar, one of the biggest tax reforms that the Modi government was pushing — the Goods and Services Tax — is unlikely to be passed by Parliament anytime soon. It is also likely to miss its implementation deadline of April 1, 2016, said most analysts. A win in Bihar would have given the BJP added political authority to push its long-pending reform bills in Parliament.

An indication on this came when former finance minister and senior Congress leader P. Chidambaram said Sunday that while the BJP’s opposition to GST (when Congress was in power) was “unreasoned, blind and arbitrary”, the Congress’ opposition to GST was based on specific objection.

Other major reforms legislation like the bankruptcy law, the real estate regulatory authority bill and labour reforms are also likely to face increased opposition in Parliament.

Global banking giant Barclays said in a note on Sunday that the BJP’s big setback in the Bihar elections could be a “stumbling block” to the Centre’s reforms agenda. It said the Bihar verdict could also lead to “weakness” in the stock market. “We feel that today’s results — the BJP’s big defeat — could be a material sentiment dampener in Monday’s early trade as this might be perceived as an additional stumbling block to the Central government’s reforms agenda,” Barclays said in a research note. Indian financial markets were cautious ahead of the poll results, and a verdict against the BJP could lead to market weakness, it added.

Top industry and business leaders have, meanwhile, begun demanding that Prime Minister Modi should fiocus more on the government’s economic agenda. “With the Bihar elections behind us, the Modi government can now give undivided attention to the economic agenda. Hope the Opposition aligns with government and electorate,” tweeted Biocon’s chairman and MD Kiran Mazumdar Shaw. She also said that Mr Modi “needs to be relieved of state election commitments and focus on the national economic agenda”.