Indialogue: Postponement of U.S.-India 2+2, One Year of GST, and More
Hi,
This week’s brief is a little shorter due some more unexpected travel delays this weekend. I dig into the implications of the postponement of the U.S.-India 2+2 Dialogue by Secretary Mike Pompeo. On the domestic front, I look at how the Goods and Services Tax is faring after one year of implementation, and an upcoming test of opposition unity as Parliament heads into the Monsoon Session.
- Aman
U.S. Postpones the 2+2 Dialogue for the Third Time
On Wednesday last week, the Secretary of State of the United States, Mike Pompeo, called External Affairs Minister Sushma Swaraj to postpone the long-pending 2+2 Dialogue between the American Secretaries of State and Defense, and India’s Ministers of External Affairs and Defence. The spokesperson for the External Affairs Ministry tweeted that Secretary Pompeo called “to express his regret and deep disappointment at the US having to postpone the 2+2 Dialogue for unavoidable reasons.” The 2+2 was first announced last August after a phone conversation between Prime Minister Modi and President Trump.
The postponement comes against a backdrop of U.S. sanctions and tariffs, leading to tension between in ties between countries despite diplomatic progress, particularly in deepening security cooperation. Indeed, India faces the prospect of sanctions from the United States on multiple fronts. Firstly, India is planning on purchasing Russia’s S-400 air missile defense system, which could trigger U.S. sanctions under the Countering America’s Adversaries Through Sanctions Act (CAATSA). Secondly, following President Trump’s decision to withdraw the United States from the Joint Comprehensive Plan of Action (JCPOA), or the Iran nuclear agreement, it has given India and China a deadline of November 4 to stop all oil exports from Iran or face U.S. sanctions. Moreover, as Indialogue last week, India has retaliated to U.S. tariffs, adding even more tension to the relationship.
Prime Minister Modi and President Trump at the White House in June 2017
Expert Voices:
Suhasini Haider notes “If there were any doubts about a ‘disconnect’ between New Delhi and Washington in the past few months, the U.S.’s decision to put off the first ‘2+2’ dialogue with India should put them to rest. The 2+2, as the enhanced engagement between the Ministers of Foreign Affairs and Defence is called, was an outcome of Prime Minister Narendra Modi and U.S. President Donald Trump’s first meeting last June in Washington. Exactly a year later, it is still to take off.”
Dhruva Jaishankar writes “The postponement, for the second time, of the first '2+2 Dialogue' involving the foreign and defence ministers of India and the United States is being projected by some as a setback in India-US strategic relations. The previous postponement related to the absence of a US Secretary of State following the firing of Rex Tillerson. The latest reason is the unavailability of his successor Mike Pompeo due to North Korea-related travel. While disappointing for India, and indicative of US political priorities at the moment, citing this as evidence of a reversal or setback in India-US security relations is short-sighted.”
Vinay Kaura points out “It is not clear if the Donald Trump administration’s abrupt decision is linked with India’s reported reluctance to cut down on oil supplies from Iran, but what it clearly indicates is the uncertainty characterising existing Indo-US relations... Whatever may be the real reason behind this unfortunate postponement, India no longer seems a priority country for the highly chaotic and unmanageably mercurial Trump administration.”
Seema Sirohi argues “Instead of reading one’s pet theory – that Americans are always out to diss India (while the Chinese are out to grab India’s territory doesn’t seem to matter as much) or India is not important to them (as if the Americans determine India’s importance) – we should just take a deep breath. A former State Department India expert said on Twitter, “I don’t think we should ditch democracies for a dictator.” It was misrepresenting the scenario... Unfortunate as the postponement is, it had nothing to do with India per se, the White House and State Department have stressed. Pompeo was appropriately apologetic in his phone call with external affairs minister Sushma Swaraj and promised to work out new dates soon. That should happen sooner rather than later.”
Insight: I’m with Suhasini Haider and Vinay Kaura on this one. The postponement, at this stage, where both countries have a lot on the agenda crucial to their bilateral issues. Yes, cooperation has deepened between the two countries in recent years, but that doesn’t ignore the legacy of U.S.-India relations that has left India to always wonder about just how reliable U.S. friendship is. At a time when the United States is led by a President who thinks diplomacy is transactional, and has put India in an uncomfortable position with sanctions and tariffs, the postponement of a meeting announced close to a year ago in favor of progress on other issues sends a signal loud and clear that India isn’t important enough right now to the United States, but that it still expects India to follow its lead on Iran and Russia or face punishment.
The Goods and Services Tax, One Year On
Last year, on July 1st, the government rolled out the Goods and Services Tax after it was passed by the central and state governments of India. This week, the Indian government has been celebrating this central achievement, while many in the opposition have taken to criticizing it.
Background: For a background on the passage of the Goods and Services Tax, read this story from Hindustan Times when the Rajya Sabha passed the Constitutional Amendment for the GST, as well as this backgrounder by The Indian Express on the rollout and implementation of the GST.
The Numbers: Before we dig in, let’s a look at the numbers from A.B. Pandey, Chairman of the GST Network:
Average revenue collection of approximately ₹90,000 crore (approximately $13 billion) a month in the first year
120 million (or 12 crore) returns filed
3.8 billion invoices (or 380 crore) invoices processed
Over 11 million new taxpayers registered so far, of which nearly 4 million are new entrants into the taxed population
Opportunities for Improvements: Clearly, the numbers show that the tax base is expanding, and that revenues are consistently high. This, however, doesn’t mean that the GST is perfect. Indeed, India’s GST regime continues to be complicated with five different tax bands, ranging from 5% to 28%. Moreover, there have been a number of changes to the rates applied to specific products. While India’s GST Council has made some steps to lower the tax rate on over 177 products from 28% to 18%, analysts have noted that India continues to have the one of the highest indirect tax rates in the world, as well as one of the world’s most complex indirect tax regimes. India can clearly do more to bring exempted items into the GST’s purview, simplify the tax further, and reduce the complexities bourne out of political calculations to make the tax more effective.
Lead-up to Monsoon Session Includes a Test of Opposition Unity
As India’s opposition parties gear up for the Monsoon Session of Parliament, Hindustan Times’ Saubhadra Chatterji notes that the election of the Rajya Sabha Deputy Chairman poses a threat to the much-discussed opposition unity. The election comes as senior Congress leader and current Rajya Sabha deputy chairperson PJ Kurien’s is slated to retire for the Upper House of Parliament today (July 2).
A number of parties in the Rajya Sabha have said that they will support a candidate that hails from neither the BJP not the INC. Indeed, a senior leader from the Biju Janata Dal has said “We will certainly not support any Congress candidate and backing a BJP candidate for this election is out of question.” Other parties, including a Trinamool Congress (TMC), which is the fourth-largest party in the house, the Telegu Desam Party (TDP), and the Telangana Rashtra Samithi (TRS) have also suggested that they may not back a candidate hailing from the INC. For its part, the Congress Party has said it “is open to supporting opposition parties but a final decision in this regard will be taken only after seeing who the proposed candidate is.” However, another challenge may also be emerging. Reports have emerged that the TMC is keen on nominating its MP, Sukhendu Sekhar Roy, as a unified candidate for all opposition parties. However, the Communist Party of India - Marxist (CPI-M) has stated on record that it would not support a TMC candidate. The opposition parties are slated to meet in July to sort this out, but consensus may be hard to come by.
Leaders of various Opposition Parties at the swearing-in of the Chief Minister of Karnataka earlier this year
The Bigger Picture: Indeed, if these parties cannot agree on a candidate for this office in the Rajya Sabha, it is going be very difficult, then, for them to argue that they can coordinate on candidates, strategy, or a unified message for the 2019 elections. It is also a test of whether the INC would be comfortable taking a backseat to the other regional parties, as many analysts expect would be part of a unified opposition strategy going into the elections. We’ll have to keep tracking this story to see whether this test cements or break up the plans for unity.
Stories you might enjoy:
Madhav Khosla and Anand Padmanabhan kick off a four-part series for ThePrint on the pending challenge to India’s Aadhar biometric identification system as the Supreme Court prepares to deliver its verdict. Below are all four articles released this week:
In their first article, they write “keeping in mind Aadhaar’s basic framework its focus on authentication, its seeding with other databases, its federated database and one-way linking – and the Supreme Court’s Puttaswamy decision upholding the right to privacy, let us consider the first legal challenge: categorising the Aadhaar Bill, 2016, as a money bill.
In their second piece, they consider how “arbitrary intrusions may take many forms. One kind of arbitrary intrusion is the absence of checks and balances on state power, because such absence allows the state to intrude upon a right without clear and effective boundaries. A major set of legal concerns relating to Aadhaar involve this argument.”
In their third article, they note that “one of the debates about Aadhaar is over the problem of excessive delegation. The legislature often delegates law-making power to the executive, including to regulatory agencies. Such delegation cannot be excessive – Parliament cannot give up its law-making power on fundamental issues, like the balancing of rights. The doctrine of excessive delegation is closely associated with the rule of law, because the rule of law consists of three components: rule creation, rule application, and rule execution. Excessive delegation bundles these components. The issue here is one of procedure: which body has the authority to pass what kinds of rules.
In their final piece, they conclude that “the Aadhaar challenge thus captures a number of procedural issues that are unrelated to the merit of the scheme: the fact that it was enacted as a money bill, the fact that the delegation to UIDAI is excessive. However, on the substance of the scheme as well, important questions arise, and only a new law that addresses these procedural and substantive concerns, from the appropriate amount of delegation to limiting the application of the scheme, should be able save the Aadhaar project.
Ajay Shukla writes “While Indian leaders and strategists claim a pre-eminent role in the Indian Ocean Region and portray the Indian Navy as the key guarantor of security in these waters, it remains unclear whether the hard power capability exists for discharging such a role. With the navy’s annual budget steadily declining, national security planners are reluctant to green light crucial power projection platforms, notably India’s second indigenous aircraft carrier (IAC-2), which should have already been under construction to join the fleet by about 2030.”
Livemint argues “Patients in intensive care are usually low on optimism—but not so in the world of Indian banking. The Reserve Bank of India (RBI) has put 11 public sector banks on a special watch list because their balance sheets have almost been overwhelmed by a mountain of bad loans. Senior officials from the 11 banks under preventive corrective action (PCA) reportedly told a parliamentary committee this week that they were confident that these banks would get back on track by 2020. There is little reason for such sanguinity. Meanwhile, the central bank has released new estimates which show that the damage to these banks will continue to worsen.”
Indialogue subscriber Emily Tallo conducted a wide-ranging interview with Dr. Paul Staniland, the Associate Professor of Political Science and Chair of the Committee on International Relations at the University of Chicago, for South Asian Voices discussing “civil-military relations in South Asia, elections and political violence, the state of U.S.-Pakistan relations, and India’s Kashmir policy, among other issues.”
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