Saturday, 24 January 2015

A Historic Opportunity

I wrote an article early in December about expected reforms to commercial laws in the coming year. I included, among others, a new companies act to replace the existing one, a goods and service tax (GST) to subsume the plethora of existing indirect taxes, a new direct tax code to replace the existing direct tax laws and lastly, changes to existing labour laws to make them more flexible.

This article was not written in 2014. In fact it was not even in this decade. I wrote it way back in December 2007. Take out the part on the new companies act and the rest of that article can still be reproduced word for word! That, my friends, is the pace at which reforms have historically moved in India. 

One of countless laws in need of overhaul 


Until a few days ago, one got the impression that the present government, having awakened long dead hopes of change, had gone into drift mode. That was before they embarked on the ordinance route. Not surprisingly, it has received considerable criticism for the use of 'midnight' ordinances from its political opponents, much of it unjustified. Let me explain why.

Article 123 of the constitution empowers the President of India to pass laws by ordinance. However, an ordinance passed under article 123 is only temporary in nature. It will become a permanent law only after it is passed by both houses of parliament. Effectively, the ordinance is only a starting point- a device to speed up reforms instead of waiting for a new session of parliament to start. Eventually it will pass through the same process as any other law- a fact the people who are crying foul are surely aware of.

It is perfectly possible that the NDA government might get around its weak position in Rajya Sabha by having the president call a joint session of both houses under Article 108 of the constitution. Should that come to pass, the govermnent will almost certainly manage to push through the changes owing to its overwhelming strength in the Lok Sabha. If the opposition feels that the government is using backhanded methods by calling for a joint session, it would do well to realise that the government's strength in numbers is due to popular mandate- and that their weak numbers are precisely due to the fact that they were rejected by the voters.

A draconian remnant of the socialist era

True, the ordinance route is normally contrary to the spirit of a democracy, but the circumstances are far from normal. We are talking about reforms that are desperately overdue. After three decades India has a government with a clear majority. The people are desperate for change and the demographic dividend will be over in another 25 years. This combination of circumstances may note present itself for several decades. India has waited several decades for change. We can either act now or remain waiting forever. For the better or the worse, the ends justify the means.