There are serious limits to what the national budget can do. When the budget is presented in Parliament, the focus is usually on sectoral allocations and tax proposals. In this year’s budget, one thing is obvious: the really significant policy shifts that will dramatically alter the government’s fiscal situation, especially in the medium-term, are all predicated on the government’s ability to get some critical Bills through Parliament.
Budget 2012-13 has an unusually long list of legislative proposals. The Constitutional Amendment Bill that seeks to bring in the goods and services tax (GST) was introduced in Parliament in March 2011. The contentious aspects of the proposed GST are yet to be resolved with the states, even as the standing committee on finance examines the proposed legislation in Parliament. The draft direct taxes code (DTC) was circulated for feedback in 2009 and, after extensive consultations, a Bill was introduced in Parliament in 2010. Many experts believe some of the most significant proposals in the draft law have been watered down in the proposal pending in Parliament, making the proposed changes merely incremental. Despite this, there is an expectation that the passage of the proposed DTC law will be useful in setting up a more progressive tax regime, while also increasing revenue for the government. The finance standing committee has just submitted its report on this draft legislation, and it is up to the government to now bring it for voting in Parliament.
The Companies Bill was first introduced by the earlier United Progressive Alliance government but, after extensive recommendations by the standing committee, the government decided it would introduce a new Bill instead of moving too many amendments to the old Bill. The new Bill, introduced in December, was again sent to the standing committee for examination. Significant proposals for reforming India’s pension system came up in the shape of the Pension Fund Regulatory and Development Authority Bill in 2005, but have not yet been passed by Parliament. The Banking Laws Amendment Bill and the new version of the Pension Bill, both introduced in 2011, are still pending in Parliament.
The major push for an anti-corruption legislation involving the finance ministry includes a Bill to be introduced to make the public procurement system more transparent. The Benami Transactions (Prohibition) Bill and the Prevention of Money Laundering (Amendment) Bill, both introduced in 2011, are also still pending in Parliament.
The budget also proposed a slew of new Bills pertaining to the finance sector to be introduced in Parliament. The Micro Finance Institutions (Development and Regulation) Bill, 2012, is proposed to be introduced to provide a legal framework for the entities engaged in microfinance and facilitate an environment for the development of microfinance services with greater transparency and effective management. This is expected to further the efforts of the government to enable the provision of microfinance services to the un-banked population. The Public Debt Management Agency of India Bill seeks to establish the public debt management agency of India. There are many conventions that we have in India that give very little manoeuvring room for Parliament to make changes to the Union budget. But the power of Parliament (especially, in a coalition government), with regard to legislation, is undeniable, despite our draconian anti-defection law that forces legislators to vote along party lines. It will take the government all the force of logic and the skill of persuasion to carry these very significant Bills through in Parliament.