3 NOVEMBER 2018
Home and beyond
TDP now believes its political fortunes lie with a nationwide grouping of opposition parties
Electoral competition, not ideological conflict, is the biggest obstacle to the making of political alliances. The coming together of the Congress and the Telugu Desam Party is not on account of any new-found affinity, but because of the cessation of an old rivalry. With the Congress no longer posing a threat to the TDP in Andhra Pradesh, and the Telangana Rashtra Samithi emerging as the principal rival of the Congress in Telangana, the Congress and the TDP are not competitors for power in either of the two States. All the reasons that drove the TDP away from the Congress and into the arms of the Bharatiya Janata Party have disappeared like ghosts in daylight. For the TDP, which is facing a robust challenge from the breakaway group of the Congress, the YSR Congress Party, the electoral campaign is built around the failure of the BJP-led government at the Centre to grant special category status to A.P. The BJP is the new political target, and the Congress suddenly is a friend. In Telangana, the TDP, which opposed the bifurcation of A.P., is a marginal player, and stands to benefit by entering into a seat-sharing agreement with the Congress. The 2014 bifurcation not only drew new boundaries, but also laid the basis for political realignments in both A.P. and Telangana.
The coalition-building exercise of A.P. Chief Minister and TDP president N. Chandrababu Naidu comes after the failed attempt of the TRS to forge a national ‘federal’ front of regional parties in opposition to both the BJP and the Congress. TRS leader and Telangana Chief Minister K. Chandrashekar Rao made some headway in talks with West Bengal Chief Minister and Trinamool Congress leader Mamata Banerjee, but an opposition front that did not include the principal opposition party at the national level was bound to be a non-starter. In contrast, from the start Mr. Naidu saw the Congress as the main agent of an anti-BJP front, and the TDP as a catalyst in the new political equation. If the TRS chose to uncouple the Assembly election from the Lok Sabha election by dissolving the Assembly prematurely, the TDP wanted to become a player at the national level in time for 2019 when elections will be held to the A.P. Assembly along with the Lok Sabha poll. Clearly, Mr. Naidu’s effort goes beyond an electoral understanding with the Congress in his home State. Besides meeting Congress president Rahul Gandhi, he engaged in wide-ranging consultations with leaders of the Nationalist Congress Party, the Samajwadi Party, the Rashtriya Lok Dal and the National Conference, indicating his interest in playing a larger role in a nationwide alliance against the BJP. The TDP’s first priority remains retaining A.P., but in Mr. Naidu’s modified understanding of the political situation, this is also tied up with the effort to unseat the BJP at the Centre. The battle for Andhra Pradesh is now part of a larger war.
Too faint for comfort?
While the spurt in GST collections brings cheer, it must be sustained to be impactful
As the Central government struggles to contain its widening fiscal deficit, there is some good news on the revenue front. Goods and services tax (GST) collections in the month of October crossed the Rs. 1 lakh crore mark, with total collections for the month standing at Rs. 1,00,710 crore. This momentum, coming in the midst of a marginal increase in the total number of filings compared to September, is expected to be sustained in the coming months, supported by the festive season that is under way. GST collections had crossed the comfort level of Rs. 1 lakh crore for the first time in April this year. The average GST revenue during 2017-18 was Rs. 89,885 crore. The reduction in tax rates under GST in July seems to have helped improve compliance among small businesses, leading to an increase in overall tax collection. It also helps to reduce the distortionary effect of indirect taxes. The increase in GST collections comes at a time when the Centre has been unable to control its spending in the run-up to the general election due by next summer. According to data released last week, the government’s fiscal deficit reached 95.3% of its budgeted estimate by the first half of the year. Direct tax collections too have increased over the past few years, reaching an all-time high of Rs. 10 lakh crore in 2017-18, helping to fund the deficit.
But all is not well on the revenue front. Tax revenues reached only 39.4% of the full-year target by the end of September. The festive season too has failed to meet expectations as of now with many consumer-facing businesses reporting lacklustre sales. Car sales reported by major companies until now, for instance, are flat. Various other economic indicators also have failed to impress in recent months. Core sector growth dropped to a four-month low in September. These growth-related factors will weigh negatively on tax collection in the coming months. Apart from the general macroeconomic environment, there are specific implementation issues that plague the indirect tax system. The export sector, for example, has been affected by undue delays in GST refunds worth thousands of crores of rupees. The GST collection in October is also still significantly below the expectations of Rs. 1.10 lakh crore. So the current spurt may be simply owing to the festival season. It may also be too soon to say that GST collections are on a sustainable uptrend simply based on the October collections. Collections during the first six months of the current fiscal year fell short of target by over Rs. 22,000 crore despite record collections in April. The government should continue the effort to make the GST more taxpayer-friendly, bringing down the cost and hassle of compliance, to achieve a sustained rise in collections.