Reforms in India are always a topic of debate both within India and Internationally. Sweden-India Business Council pioneered talking about Indian states instead of “India”, in Sweden, in an attempt to make India more comprehensible for people. In that spirit, we will take a look at recent events.
The big national reforms companies have been expecting are; GST (Goods and Service Tax), Land Acquisition and Labour laws. Two out of three of these have now been referred to the states in an attempt to create competition. The states can now make their own policy and enact laws on land purchase. This does not necessarily make it easier to understand given that there are still national laws in place where some state laws will now supersede national laws. Here situations will rise where national and state level laws collide leaving it up to the Supreme Court to decide the outcome. Allowing the Supreme Court to decide is normal in the Indian legal system and usually, sound judgment of the laws prevail.
Similar goes for labour laws. Rajasthan is first to reform labour laws, increasing the levels for laying off people by a company of the size of 100 employees to 300 employees, and the requirement to offer union participation when 16% of the work force opts for it to a 30% requirement. Both are steps in the growth direction, but now companies need to keep organising administration for tracking rules in one state where they have one factory and other regulations in another state for its other factory. This seriously captures the essence of the challenge already shown in the GST with different rules in different states. The Government is betting on that best practise laws will spread and become the Mod(i)us Operandi across the nation. India is like Europe and US put together, lots of different way of doing things and it will take time. Patience in the instant global information spread is running out. The strength of India is that there is a political process; speed is not always good if it back fires.
In regards to the GST, sadly, it looks now unlikely that the GST will be able to be implemented on April 1st, 2016 as previously stated by the government. In an attempt to hold onto the little power they have left, Rahul Gandhi’s Congress party was successfully able to rally parties against the GST bill in the Rajya Sabha, where bills have to pass to become laws, and the Modi lead NDA government does not control the upper house. The solution will likely be that of traditional political horse trading, or waiting until the NDA do control the upper house, or work up enough votes to pass the bill. This is a bill everybody wants, its just power politics now.
Robin Sukhia is President & Secretary General of Sweden-India Business Council