New Delhi: A day after the ruling Bharatiya Janata Party (BJP) secured an electoral victory in two more states, the National Democratic Alliance (NDA) government received Parliament’s backing on Tuesday for two key reform bills.
The Companies (Amendment) Bill, 2017, is aimed at improving corporate governance and the Indian Institute of Management Bill, 2017, at granting autonomy to the elite B-schools, ridding them of government interference.
Both received the Rajya Sabha’s approval, having been passed earlier by the Lok Sabha, and now need the President’s signature to become law. It comes on top of the BJP’s morale-boosting wins in the Gujarat and Himachal Pradesh assembly elections.
After cracking down on unaccounted wealth through demonetisation in November last year and rolling out the goods and services tax (GST) from 1 July to unify India into a common market, the government has other pending reform measures on its agenda. They include a possible merger of some state-run banks to improve efficiency, a new direct tax code and divestment of government stakes in some state-owned enterprises.
Analysts said the government is likely to continue to demonstrate its resolve to implement reforms where needed, although most of its time and resources would go into seeing through to completion the measures already announced.
The move towards integrating the informal part of the economy into the formal one through GST was a sequel to demonetisation, said A.K. Verma, a Kanpur-based political analyst and political science professor at Christ Church College.
“In the same way, what follows logically to the government reforms already taken are the ones likely to follow, although new reforms having the potential for major disruption in the economy are unlikely till the 2019 national polls,” said Verma.
Prime Minister Narendra Modi, in his address at the Hindustan Times Leadership Summit on 30 November, said that he was prepared to pay a political price for fighting corruption as part of his government’s wider efforts to change the “broken system” of the past 70 years and improve the lot of the country’s poor.
The IIM Bill grants administrative, academic and financial autonomy to the elite B-schools and allows them to award full-fledged degrees to their students.
The Companies (Amendment) Bill, 2017, has restored the original provisions in the Companies Act, 2013, that empowered the government to limit the number of layers of subsidiaries a company can have.
This provision was to be liberalized as per an earlier form of the bill but the government chose to implement the original provision through a notification in September, limiting the layers of subsidiaries that companies can have to two, which will apply prospectively.
Existing companies have to disclose all details of their subsidiaries to the Registrar of Companies. The bill passed by the Rajya Sabha on Tuesday simplifies many procedures and proposes stringent penalties in case of non-filing of balance sheets and annual returns.
“Improved corporate governance is a step in the right direction. The ease of doing business ranking has improved over the last year and the new bill is expected to further enhance the ranking. In order to generate maximum impact, companies will need to follow it in true spirit,” said Mukul Shrivastava, partner, fraud investigation and dispute services, EY India.