Pending reforms include Direct Taxes Code Bill, Goods and Services Tax
As Pranab Mukherjee prepares to vacate the North Block premises for good — the office of Finance Minister he held for the second time after a long gap in his political career — to enter the hallowed precincts of Rashtrapati Bhavan next door, he will leave behind a host of unfinished tasks on the economic front, though none of them are of his own doing.
At a time when the economy is on the downslide whichever way one looks at it — be it the widening fiscal and current account deficit, sliding economic and industrial growth, high inflation and burgeoning subsidies — and the need of the hour is a few pending reform shots of adrenalin to lessen the impact of the global economic slowdown, a shift at the helm of the Finance Ministry is likely to be viewed as a setback in the absence of a smooth transition.
However, with a number of able candidates to choose from as replacement for Mr. Mukherjee as Finance Minister, the selection has to be a concerted decision between Prime Minister Manmohan Singh and UPA chairperson and Congress president Sonia Gandhi. But since all of them — there are nearly half-a-dozen names doing the rounds — have their own bagful of positives and negatives, the general perception is that the Prime Minister may decide to keep the portfolio with himself for some time.
Among the pending tasks that Mr. Mukherjee will leave behind are the two major reform exercises in the field of direct and indirect taxation. While the Direct Taxes Code Bill, which seeks to replace the archaic Income Tax Act, 1961, is in the pipeline for legislation with the Standing Committee on Finance already having vetted it and given its recommendations, it is the much-delayed Goods and Services Tax (GST) that is likely to be in limbo for some more time.
This is for the simple reason that although the Parliamentary standing panel headed by the former Finance Minister and BJP leader Yashwant Sinha has already started the process of scrutiny in this regard, the fact remains that even a consensus man of the likes of Pranab Mukherjee could not bring all the political parties on board. The proposed changes in indirect tax laws to roll out GST require a Constitutional amendment with two-thirds majority in Parliament followed by ratification by the States.
Considering that even Mr. Mukherjee could not bring about a consensus despite his best efforts and appeals and differences still persist on a number of issues, including the question of the State's autonomy in levy taxes, it is unlikely that a new Finance Minister would be able to take up the issues from where he left off.
Still pending alongside are a number of financial sector reforms in the field of banking, insurance and pension which are yet to go through Parliament, not to talk of the more ambitious FDI (foreign direct investment) in multi-brand retail. While the FDI in multi-brand retail was put on the backburner quite some time back owing to a lack of consensus among the UPA coalition partners themselves, apart from the Opposition, the latest to be shelved was pension reforms as the Trinamool Congress sought to defer a decision on it by the Cabinet.
With the Trinamool Congress not being on the same page in choosing the UPA's candidate for the Presidential election, it now remains to be seen which way the pending reforms go. A view doing the rounds among industry watchers is that isolation of the UPA coalition partner may, in fact, be beneficial in going forward with the reforms.