The Parliament’s monsoon session will test the NDA government’s political risk management ability to push through crucial policy moves amid heightened hopes that it will be able hammer out a consensus on key initiatives, including the contentious goods and services tax (GST).
In the last two years, it has been able to implement some politically contentious policies and legislations including aligning diesel prices with international crude oil costs.
It also managed to work out a consensus across Parliament’s political aisle on raising the foreign direct investment (FDI) ceiling in insurance to 49% from 26%, but not before an unrelenting Opposition forced it to refer the bill to a select committee.
Experts also count the passage on the bankruptcy code and the real estate regulation laws as among the NDA government’s reforms triumphs.
Attempts to ease land buying rules and bring about a vastly modified central land acquisition law has, however, proved to be a difficult political barrier to surmount for the Narendra Modi-led government. Its efforts to change social security rules have also met with limited success.
In March, it rolled back the controversial budget proposal to tax employees’ provident fund (EPF) withdrawals, caving in to mounting opposition by labour unions, the salaried class and rival political parties.
In the budget presented by finance minister Arun Jaitley on February 29, the government had announced that 40% of an individual’s accumulated corpus in EPF and National Pension System (NPS) schemes would not be taxed at the time of withdrawal.
This was taken to mean that the remaining 60% of the EPF corpus was taxable.
The budget had also proposed a monetary ceiling of Rs 1.5 lakh on employers’ contribution to PF accounts. This was also withdrawn.
Almost all governments since 1991, the year when India rolled out its economic reforms programme, have had run into Opposition’s insistent demand for roll-backs or changes in policies.
Former finance minister Manmohan Singh was forced to moderate a steep hike in fertiliser prices proposed in 1991. Likewise, Yashwant Sinha as finance minister had to rollback a decision to raise manure prices in 2000.
In 2006, the Manmohan Singh-led UPA government acceded to ally Dravida Munnetra Kazhagam’s (DMK) demand, putting on hold the disinvestment programme for public sector enterprises.
The DMK had threatened to walk out of the government but not out of the UPA if its opposition to the Neyveli Lignite Corporation was not heeded.
Then again in 2012, the UPA government, battling surging criticism of policy paralysis, quickly bottled up a proposal to open foreign investment for the pension sector fearing reprisal from key ally Trinamool Congress.
The same year, the UPA government had raised diesel prices by Rs 5 a litre—the steepest ever hike -- and capped sale of cheaper cooking gas to six cylinders a year for each family. The cap on cooking gas was later raised to nine cylinders a year and later to 12 cylinders, as the government had to expend a lot of political capital in managing a restive alliance in its final year.