After months and months of delays, Indian Prime Minister Narendra Modi’s party is optimistic about a breakthrough on a goods-and-services tax.
Modi has enough backing from smaller regional parties to pass the measure in the parliamentary session starting next month without support from the main opposition Congress party, Transport Minister Nitin Gadkari said in an interview. Congress, which first proposed the constitutional amendment in 2006, has blocked it in the upper house of parliament.
"If the Congress don’t want to support the bill, they will be isolated," Gadkari, a former president of Modi’s Bharatiya Janata Party, said in an interview in New Delhi on January 26. "The other opposition parties will support it, and I am expecting that the bill will be passed."
The tax, known as GST, aims to whittle down a bevy of taxes that impede trade in the world’s fastest-growing large economy. Finance Minister Arun Jaitley said in Davos last week that India’s economy is likely to expand between 7 percent to 7.5 percent this year, below the potential rate of about 9 percent.
While Modi has taken steps to boost foreign investment and infrastructure spending, the GST has become a bellwether for progress. His failure to get it through parliament despite holding a majority in the lower house has hurt investor sentiment, contributing to outflows that have made the rupee Asia’s second-worst performing currency in the past three months.
In the interview, Gadkari said the measure has the backing of regional parties holding power in Tamil Nadu, West Bengal, Uttar Pradesh and Bihar -- which together account for 36 percent of the nation’s 1.3 billion people.
“Congress wants to play politics on this issue," Gadkari said.
While the Janata Dal (United) party in Bihar supports the tax, Modi should still engage the Congress party and look to avoid a divisive vote, spokesman K.C. Tyagi said by phone. Representatives of the other parties couldn’t be contacted.
Congress is demanding several changes, including capping the overall rate at 18 percent and scrapping an additional 1 percent tax designed to compensate manufacturing-heavy states that fear losing revenue once the measure is implemented. The government has signaled room for compromise, though a formal deal remains elusive.
In a statement earlier this month, Congress called its proposals “meaningful and constructive." It also accused Modi of repeatedly shifting his position on the GST, and urged him to “stop hoodwinking, misleading and pulling wool over the eyes" of India.