Wheels of Rajya Saba May Not Turn As Fast As Morgan Stanley Expects Them To

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One of the things that I have written about in the past is the fact that the Bhartiya Janata Party(BJP) led National Democratic Alliance(NDA) government is likely to continue to be in a minority in the Rajya Sabha until 2019. The next Lok Sabha elections are due in 2019.

Even if one were to be very optimistic, the NDA would touch around 100 seats in the Rajya Sabha by 2019. Why is that? Unlike the Lok Sabha, the Rajya Sabha is not elected all at once. A certain section of the members keeps retiring, elections are held for these seats and new members are elected. Hence, the composition of the Rajya Sabha keeps changing gradually unlike that of the Lok Sabha, which changes all at once.

Given that NDA does not have numbers in the Rajya Sabha, it has not been able to get key legislation passed. In a recent research report titled GST, The Way Forward, analysts Sheela Rathi and Ridham Desai of Morgan Stanley, suggest that this is about to change and by July 2016, the government may be able to push through key economic legislation like the Goods and Services Tax (GST), through the Rajya Sabha.

So what is it that Rathi and Desai are seeing which others can’t. Before we get into this, it is important to understand how the composition of the Rajya Sabha will change in the months to come. Every two years around one-third of the total members of the Rajya Sabha retire and new ones are elected.

Between March and July 2016, 75 members will retire from the Rajya Sabha. New members will be elected. These members are elected indirectly through an electoral college consisting primarily of the elected members of the state legislative assemblies. So you and me, dear readers, elect the members of legislative assemblies (MLAs) who in turn elect the members of the Rajya Sabha.

After these elections, the numbers of seats the BJP led NDA has in Rajya Sabha will go up. As Akhilesh Tilotia(the author of The Making of India), Sanjeev Prasad and Sunita Baldawa of Kotak Institutional Equities, write in a research note titled Wheels of Rajya Sabha Turn Slowly: [In July 2016] core NDA allies will have 68 Rajya Sabha MPs (currently 61), almost similar in number to what the INC is expected to have (65)…After this round of elections in the Rajya Sabha, the next large round of elections will be in April 2018 and by then the NDA government at the Center would have completed four years of its tenure. The government will continue to have a minority position in RS until late in its term.”

So, the NDA will have 68 members in the Rajya Sabha by July 2016. While this is better than the 61 members they currently have, it is too small in a house of 245. It also needs to be mentioned here that in order to get a Constitution Amendment Bill, like the GST, passed, the approval of two-thirds of the members of both the Rajya Sabha and the Lok Sabha is needed.

A joint sitting of both the houses of Parliament cannot be called in order to get a such a Bill passed, if the houses do not agree on the Bill. Article 368 of the Indian Constitution basically mandates that both the houses pass the Bill separately with a two-thirds majority.

Currently, the Rajya Sabha has 242 members instead of the sanctioned strength of 245. A two thirds majority would mean getting the support of 163 members. So how will NDA with 68 members in the Rajya Sabha get a constitutional amendment which needs the support of 163 members passed?

Rathi and Desai make a huge leap of faith here. As they write: “Currently, BJP and its allies have 60 seats in the Upper House, and, along with parties supporting GST, there are 97 votes in favour of the bill. This count increases to 110 by the end of July with the upcoming retirements…In the first scenario, all members participate in voting. The BJP and its allies see their seat membership increase to 110 from 97 seats. There are another 44 members that are currently supporting the bill. Supporting votes add up to 154. There are another nine who are neutral at this point and could swing either way. If the government can garner support from these members, then getting to the 163 vote mark becomes likely by July 2016.

QED.

One of the parties which Rathi and Desai list as supporting the BJP on GST is AIADMK. The party currently has 12 members in the Rajya Sabha. The Kotak analysts expects the party to continue to have 12 members even after July 2016.

Further, the AIADMK is against the GST. As AIADMK leader A. Navaneethakrishnan said in November 2015:The GST in its present form will have a huge impact on the fiscal autonomy of States and the revenue loss it is likely to cause to Tamil Nadu will be considerable.”

Also, the party’s main leader J Jayalalitha is known to be mercurial.

Rathi and Desai also list Samajwadi Party as one of the supporters of the GST Bill. The party currently has 15 seats in the Rajya Sabha. This is expected to rise to 19 by July 2016. Samajwadi Party is the biggest party in the Rajya Sabha after Congress and the BJP.

Does the Samajwadi Party actually support GST? As Akhilesh Yadav said in early December 2015: “Without thinking much, anyone is expressing support to GST Bill in the parliament. State would be at loss.”

The analysts also assume that the Peoples Democratic Party(PDP) of Kashmir is in the NDA camp when it comes to GST. If that was the case, why haven’t the BJP and the PDP been able to form a government in Jammu and Kashmir, after the death of the chief minister and PDP leader, Mufti Mohammed Sayeed.

Also, the state finance minister Haseeb Drabu has spoken against GST in the past. As he had said in May 2015: “Jammu and Kashmir is unlikely to implement GST regime as it compromises its special position…. J&K is the only state that has the authority to legislate on all taxes and this will go with the new GST regime.”

Given this, I really don’t know how Rathi and Desai have assumed that AIADMK, PDP and SP are supporting the NDA on GST. Also, the assumption here is that the Congress party will keep sitting and not do anything about the BJP led NDA trying to get other parties in favour of GST.

Further, the Morgan Stanley analysts write: In the second scenario, the INC (i.e., 67 current Upper House members) abstains from voting, and then the government needs 123 votes. In this situation, the bill can even pass during the second part of the budget session, between April and May. By April, we think the BJP and parties supportive of the bill will have 107 seats. in Rajya Sabha; they need another 16 seats to get the votes in the favour of the bill, which are already available to them.

This is a politically naïve assumption which has been made to arrive at the conclusion that the NDA will get the numbers to get the GST Bill passed. Why would the Congress party give a walkover to the NDA? Beats me.

Further, the report does not take into account the state assembly elections which are due to happen in April and May 2016. The counting for four assembly elections (Assam, West Bengal, Tamil Nadu and Assam) and one union territory election(Puducherry) will happen on May 19.

The results of these elections will also have an impact on whether political parties will continue to support the BJP in its bid to get the GST Bill passed in the Rajya Sabha. If the BJP performs well (i.e. it wins in Assam, does well in West Bengal and manages to open its account in Kerala) the hawa will be in its favour.

If it doesn’t do well, the hawa will go against it. In this scenario, many small political parties who are in the ‘supporting’ camp may decide to desert it. Even if the BJP does well, some parties might still want to stay away, in order to portray that they are not giving in, to the BJP. This is something that cannot be known in advance.

Once these factors are taken into account it is safe to say that there are way too many holes in Morgan Stanley’s prediction of the BJP led NDA being able to get the GST Bill passed in July 2016. It’s a nice story, but on the current evidence, it doesn’t seem plausible.

The column originally appeared in the Bangalore Mirror on March 9, 2016

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About vivekkaul
Vivek Kaul is a writer who has worked at senior positions with the Daily News and Analysis(DNA) and The Economic Times, in the past. He is the author of the Easy Money trilogy. Easy Money: The Greatest Ponzi Scheme Ever and How It Is Set to Destroy the Global Financial System , the latest book in the trilogy has just been published. The first two books in the trilogy were published in November 2013 and July 2014 respectively. Both the books were bestsellers on Amazon.com and Amazon.in. Currently he works as an economic commentator and writes regular columns for www.firstpost.com. He is also the India editor of The Daily Reckoning newsletter published by www.equitymaster.com. His writing has appeared across various other publications in India. These include The Times of India, Business Standard,Business Today, Business World, The Hindu, The Hindu Business Line, Indian Management, The Asian Age, Deccan Chronicle, Forbes India, Mutual Fund Insight, The Free Press Journal, Quartz.com, DailyO.in, Business World, Huffington Post and Wealth Insight. In the past he has also been a regular columnist for www.rediff.com. He has lectured at IIM Bangalore, IIM Indore, TA PAI Institute of Management and the Alliance University (Bangalore). He has also taught a course titled Indian Economy to the PGPMX batch of IIM Indore. His areas of interest are the intersection between politics and economics, the international financial crisis, personal finance, marketing and branding, and anything to do with cinema and music. He can be reached at vivek.kaul@gmail.com

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