In PM Modi's Speech, A Reference To 2014 Article On India's Trade Practices

Prime Minister Narendra Modi today said that the Goods and Services Tax reforms would usher in a countrywide "GST Bachat Utsav," benefiting poor, middle-class, farmers, traders, and entrepreneurs alike. In his speech, he recounted the early days of his prime ministership in 2014, recalling a foreign newspaper column that had explored India's trade practices back then.

The Prime Minister's reference was to an article published in the Financial Times by veteran South Asia correspondent Victor Mallet. Titled 'Notebook: India is a nation in need of a trade deal with itself', the 2014 piece described the extraordinary logistical hurdles companies faced in moving goods within India -- some so complex that one French technology firm reportedly found it cheaper to ship components from Bengaluru to Europe and then back to Hyderabad, a journey of several thousand kilometres, rather than transport them the 570 kilometres overland between the two Indian cities.

"Friends, this was the situation at that time due to the complexities of taxes and tolls," PM Modi said. "At that time, millions of such companies, along with millions of countrymen, faced daily problems due to the maze of various taxes. The increased expenses incurred in transporting goods from one city to another were borne by the poor, and customers like you were charged. It was essential to free the country from this situation."

Mr Mallet's article, which PM Modi cited, read: "One French technology company, according to Les Echos, the French business newspaper, sometimes finds the most cost-effective way to send parts from Bangalore to Hyderabad 570km away is to dispatch them from Bangalore to Europe and then back from Europe to Hyderabad."

He went on to write about the inefficiencies caused by clogged roads and limited freight rail, as well as the burden of multiple state-level taxes and checkpoints.

"At present the cost of logistics for Indian manufacturers is often more than the entire wage bill-more than double, in the case of textiles-and far higher as a percentage of sales than for international competitors. Halving the delays caused by roadblocks and other stoppages would cut freight times by 20-30 per cent and logistics costs 30-40 per cent, says the World Bank," Mr Mallet wrote.

The article pointed to a solution by suggesting a nationwide general sales tax, a proposal that had circulated for years but never been fully implemented. Quoting Onno Ruhl, then the World Bank's country director, Mr Mallet wrote: "India actually has an opportunity to conclude a free-trade agreement with itself."

Cut to 2017, PM Modi's government introduced the Goods and Services Tax.

GST Utsav

In his address, PM Modi declared that from September 22, coinciding with the start of Navratri, consumers would begin to feel the impact of the latest reforms, dubbed GST 2.0.

"From tomorrow, you will be able to buy your favourite items with ease. This is like a GST saving festival for every Indian," the Prime Minister said.

Calling it a "festival of savings," he added: "Next gen GST reforms being implemented from tomorrow, it is like 'GST saving festival'. The poor and the new middle class are getting double benefits after the GST rate cuts."