Aftermath of the 2017 Assembly Elections
The verdict is out and the mandate is very clear. People stood with the Government agenda of Reform. With the biggest electoral test cleared, the Government Of India is poised to take the controversial reforms head on. The electoral math will in next few years be completely in favour of the ruling saffron party. With country voting for development and reforms instead of caste and religion, the Modi Government is expected to become more courageous. The power of the unprecedented mandate and the mission of this Government clearly indicates what is in the store for us.
Reforms – Gradual instead of Big Bang
Some of the reforms that have been implemented recently by the Government include:
- GST is all set to be rolled out by July 2017.
- Some recent changes in the ESI and PF limits and returns have been introduced.
- There are some consolidation in the registers as new consolidated and simplified formats have been introduced.
- Cash donation limit reduced from 20,000 to 2,000
Next on the agenda is labour reform. None of the previous Governments have been able to touch this sensitive issue so far. With most of labour unions opposing the reform it will not be easy to implement. Options with the Government include launching the reforms at a state level starting with major BJP governed states. This will be more controlled and will give the Government opportunity to steer/manage dissent. Other option is for Modi to again utlitize his political capital and take the Demonetization route. Which strategy the GOI applies is yet to be seen.
Ease of Doing Business
With Modi’s pet initiatives StartUp India, Digital India & Make in India yet to take off as desired, the reforms are aimed at helping push these further. Single tax code, simplified labour laws & tax benefits are likely to improve the overall business environment. GOI in all likelihood would like to get these initiatives fully implemented before the next General Elections in 2017. GOI is also working on an eCompliance platform to help capture the registers and forms online instead of maintaining physical copies of the registers.
What this means for the companies is reduction of the interference from the inspectors. Self regulation will soon be the norm for compliance making it simpler and easier for the companies. With the planned eCompliance initiative the record keeping is also expected to be automated. This however means that the enforcement will become more effective and consequences of non-compliance will more severe.
Gear up and Prepare
While the GOI is preparing itself and gearing towards a more business friendly environment, it is sensible for the businesses to rework their strategies. The Jugaad or ‘Handling’ of the non-compliance might not work anymore and the elimination of the inspectors will make things more transparent. The existing inspector Raj & the Jugaad culture will pave the way for a fully automated and transparent system that will strike a balance between labour conditions and the business environment conducive for growth.
It is therefore very crucial for the businesses to start taking their compliance seriously and monitor/audit the progress. The penalty of non-compliance can be applied retroactively and if compounded the penalty can be very serious for the businesses.
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