GST course correction: Only time will tell

Righting a wrong is what the Goods and Services Tax Council did following the hurried, ill-fated implementation of GST in July. The disastrous hurry coupled with the earlier hare-brained demonetisation of high-end currency notes, hastened the plunge of the economy to a three-year low at 5.7 per cent. This is not to mention the hardships faced by thousands upon thousands of people who lost their jobs, and access to health and education facilities, particularly in the rural areas which have a cash economy.

It was a far cry from the two per cent hike in GDP that the GST implementation was supposed to have achieved according to the lobbies that pushed vociferously for it. But as they say the proof of the pudding is in the eating, so time will reveal whether the course correction suggested by the GST Council at its 22nd meeting will be a game changer and see a two per cent growth in GDP. By targeting exports and easing the compliance burden of the medium and small and micro enterprises who are the job generators, the council expects to kickstart the momentum in the growth of the economy and exports. India’s exports have been coming down while globally they are buoyant. It is hoped that the government releases funds held up for several months from next week as promised. This will help the liquidity position of small exporters who don’t have access to institutional funds.

It cannot be pure ittefaq (chance) that the council selected two sectors that are labour-intensive and provide jobs that are desperately needed by millions that enter the job market each year. It will also increase the purchasing power in the hands of the people as it brings down the tax on items of mass consumption. Demand for products will lead to more production and more jobs. The politics behind some items where tax rates have been slashed like khakras and namkeen, favourites with the community cannot be overlooked with elections due in Gujarat. The council probably feels that the way to voters’ heart is their stomach, but it is debatable whether they will bite the bait. The Gujaratis are an enterprising trading community and they have been hit hard by demonetisation and GST. They even scoffed at the astronomical bullet train pie-in-the-sky promise. The whopping $17 billion, the hard headed community feels could be better spent on badly needed education, health and human resources development in which the state is sorely lacking. They are running riot on social media against the PM’s policies.

Prime Minister Narendra Modi had promised 10 million jobs in five years but three years into his regime going on to four, only a few lakh jobs have been created. Even if one considers that the labour ministry may not have captured the full extent of jobs created, there is still no way that six million jobs have been created in the last three years. Mr Modi is aware of this and has set up a panel to come up with a roadmap to set things right. Better late than never.