JANUARY 31, 2018

By Vijay Kumar

AND then felt I like some watcher of the skies, When a new planet swims into his ken.

This is a quote from a poem of John Keats, "On First Reading Chapman's Homer", used by poet economist CEA Arvind Subramanian in the title, rather tag to the title, "A New, Exciting Bird's-Eye View of the Indian Economy Through the GST" in Chapter 2 of Volume 1 of his Economic Survey.

He starts the chapter with, "Just for one reason, policymakers and researchers could soon share the sense of wonder that the poet expressed on first encountering the Greek epic, when he felt that a whole new world had suddenly opened up to him: the Goods and Services Tax (GST)."

To understand this, you should know who John Keats is, who Homer is, who Chapman is and why and how planet swims into one's ken and what has GST got to do with it.

For the uninitiated, Homer was an ancient Greek poet who lived somewhere around 800 BC. He is the author of two epics, Iliad and Odyssey, which are mentioned even today for concepts like "Trojan Horse". John Keats is an English poet who lived more than 2000 years after Homer and who could not obviously read Homer because it was all Greek to him. There was another poet called Chapman who lived in the Sixteenth Century who translated Homer. When Keats read Chapman's Homer, he got excited and wrote a poem "On First Reading Chapman's Homer". Keats' poetry on Chapman on Homer is also not very easy to understand.

The poem and a free translation is given below -

When I was taught this poem in school, I did not believe my teacher, "how can travelling in the realms of gold mean reading books? But maybe that's how poetry is written. Laws are of course more complicated. And incidentally Keats had got it wrong; he thought that Cortez discovered the Pacific. But anyway, his poems were never meant to be accurate and were never meant to be analyzed by tax experts and argued in courts.

But what has all this got to do with GST? Two hundred years after Keats, we have an Economic Advisor, who not only knows his economics but also knows his Keats. Keats says that when he read Chapman's translation of Homer, he felt like a watcher of skies when a new planet swims into his ken. It is not every day that a new planet would swim into the ken of a sky-watcher – of course all excited. And our Chief Economic Advisor wants us to have the same feeling when this new planet of GST swims into our ken. Poetry has no stakes the likes of which you will find in taxation. For me, Homer, Chapman, Keats, Arvind Subramanian and GST are beyond comprehension. GST hit us like a thunder – was certainly not the planet that swims into the ken of a sky watcher.

While on Homer, the erudite Chief Economic Advisor surely knows the story of Scylla and Charybdis. In Homer's odyssey, Scylla was a horrible six-headed monster who lived on a rock on one side of a narrow strait. Charybdis was a whirlpool on the other side. When ships passed close to Scylla's rock in order to avoid Charybdis, she would seize and devour their sailors. They were regarded as a sea hazard located close enough to each other that they posed an inescapable threat to passing sailors; avoiding Charybdis meant passing too close to Scylla and vice versa. Isn't our GST something like that for the taxpayer as well as the Government?

Pooling of Sovereignty: The Economic survey lauds the GST Council as, "India has created one of the most effective institutional mechanisms for cooperative federalism, the GST Council. At a time when international events have been marked by a retreat into economic nativism and the attendant seizing of control, Indian states and the centre have offered up a refreshing counter-narrative, voluntarily choosing to relinquish and then pool sovereignty for a larger collective cause. 

Cooperative federalism is of course not a substitute for states' own efforts at furthering economic and social development. But it is a critical complement, needed to tackle a wide array of difficult structural reforms that involve the states. For example, the "cooperative federalism technology" of the GST Council could be used to create a common agricultural market, integrate fragmented and inefficient electricity markets.."

Maybe we can soon have a GST Council technology enabled Councils for Education, Agriculture, Home and any subject that you can think of.

That is what exactly the Economic Survey seems to suggest when it proclaims,

"The cooperative federalism "technology" of the GST Council that brings together the Center and States could be promisingly deployed to further agricultural reforms and durably raise farmers' incomes. Recent experience with the GST has shown that vertical cooperation between the center and states--Cooperative Federalism--has brought transformational economic policy changes.

Perhaps there is a horizontal variant of that--one might call it the Cooperative Separation of Powers--that could be applied to the relationship between the judiciary on the one hand, and the executive/legislature on the other. There are, of course, clear lines of demarcation and separation of powers between the two to preserve independence and legitimacy. Even while respecting these lines, it should be possible and desirable for these branches to come together to ensure speedier justice to help overall economic activity."

Revenue Confusion – nothing to worry: The Survey reports, "Confusion, even anxiety, abounds about revenue performance so far after five months of collections under the new GST. This confusion is understandable given its newness and complexity. Confusion has also arisen because of the attempt to view this through the narrow lens of the states or the centre; of uncertainty about the build-up of balances in the IGST and their sharing; and of the fact that only 11 months revenues will be collected. 

To be sure, uncertainty will not be definitively lifted until the GST stabilizes later this year. But the provisional assessment is this: revenue collection under the GST is doing well, surprisingly so, for such a transformational reform.  

Everything is fine; Thank You

GST and India's ranking in Ease of Doing Business: In Para 9.7 of the Survey, it is stated, "In the last three years, the Government has undertaken a number of reforms to ensure that India remains an increasingly attractive investment destination, which include announcement of National Intellectual Property Rights (IPR) policy, implementation of GST, reforms for ease of doing business that resulted in improving India's ranking by 30 position."

But Para 9.2 clarifies, "This year's report did not cover other measures such as the Goods and Services Tax (GST), which are expected to further boost India's ranking in the coming years." 

Will GST influence our rank in the Ease of Doing Business in future?

And what is an Economic Survey without a mathematical formula? Here is a simple one from the Economic Survey.

Watch the skies; one day a new planet will swim into your ken.