The BJP-led Indian government began a last push before the end of a stormy parliament sitting to pass a major tax reform aimed at boosting economic growth, but an opposition party dug in its heels to stop the bill.
Aimed at creating a customs union, the Goods and Service Tax (GST) is the biggest revenue shake-up since the country’s independence in 1947. Supporters say it will add up to 2% points to economic growth.
A series of obstacles to the Prime Minister Narendra Modi’s ambitious agenda of economic reform has increased a sense among debt-laden domestic companies suffering subdued earnings that India’s fledgling economic recovery could take longer.
Indian shares fell about 1% yesterday led by declines in banking stocks along with jitters over the parliament showdown and China’s yuan devaluation.
Finance Minister Arun Jaitley introduced the bill in the upper house to yowls of protest from members of the opposition Congress party. Seconds later, the speaker adjourned the chamber, putting off any discussion until Wednesday.
The Congress party is demanding the resignation of senior BJP leaders it accuses of graft before allowing parliament to work. It also wants changes to the bill, which it says has been diluted to win support from states.
Failure to pass the GST bill now will make it hard for Modi to meet a self-imposed 2016 deadline for implementing it. In a research note, DBS Bank said any holdup “will be negative for market sentiment and could further delay the recovery process.”
