In this article, Hardeep Singh of Campus Law Centre discusses Legislative Reforms introduced by Atal Bihari Vajpayee during his tenures as the Indian Prime Minister.
“Empowering the individual means empowering the nation, and empowerment is best served through rapid economic growth with rapid social change”.
These lines by Bharat Ratna, Late Atal Bihari Vajpayee clearly reflect the ideology and the nature of reforms brought in by him for development of the country. He did not only improved the economy of India by introducing economic reforms but also introduced social reforms for the upliftment of marginalised sections of the society. His focus was to unlock India’s economic potential and ensuring India’s presence in the global competitive market. He was one of the finest Statesmen of the country and the first non-congress Prime Minister who completed a full five years tenure as the Prime Minister.
Reforms in the Energy Sector
The Indian Power Sector was under monopoly of the State in the early 1990s. The stepping stone for all power sector reforms were laid down by the Vajpayee government by introducing the Electricity Act, 2003 which consolidated the laws relating to generation, transmission, distribution and use of electricity. The Act was aimed at creating a market based regime in the power sector in India by promoting competition. It served the purpose of protecting the interest of consumers and supplying electricity to the whole nation.
With the enforcement of this Act, the Single Buyer model was changed to a Multi Buyer model. Opening up of power sector to private companies provided a tremendous potential for investment in generation, transmission and distribution of electricity resulting in improvement of infrastructure which led to strengthening of the Indian Power Sector.
Creating a market based regime led to an environment where the monopolies enjoyed by the State Electricity Board (SEB’s) for buying/selling power ceased to exist, further leading to a market determined tariff structure.
Introduction of Value Added Tax
Value Added Tax (VAT) was introduced during his tenure as the Prime Minister and came into force a little after his tenure as was agreed by the States. It was an indirect tax which replaced the general sales tax and was comparatively lower than the rate of sales tax. It has been a major source of revenue for all Indian States and Union Territories.
It helped the traders due to its uniform tax rates and also provided for self assessment, which reduced the need for a taxpayer to frequently visit a Tax Department Officer.
The law brought in the concept of Input Tax Credit, which put an halt to the practice of imposing tax over tax, which in return reduced the prices of the goods that the consumers had to pay. It also benefited the government as the traders were conducting self assessments which led to saving of resources, and the revenue department focused more on collection of tax rather than the administrative processes.
Not only did he introduce VAT but also made the first move towards the landmark tax reform of GST. A report was given by a task force constituted by the Vajpayee government suggesting that Central and State levies should be merged into one as Goods and Services Tax (GST).
Reforms in Public Sector Undertaking: Privatisation Policy
During his tenure, he aimed at further enforcing the privatisation policies introduced in 1991. He was an advocate for private businesses in the country and worked towards reducing the government’s involvement in various industries. The government sold its share in 32 companies controlled by the State. The first public company that was fully disinvested in the tenure of Atal Bihari Vajpayee was Lagan Jute Machinery Company Limited (LJMC).
Two Public Sector service providers were privatised in 2000-2001. International long distance business, which was the monopoly of public sector, was opened, de-regularized and unrestricted entry of competitors was permitted in 2002-2003. Further, he formed a separate disinvestment ministry. The most important disinvestments made by the newly established ministry were Bharat Aluminium Company (BALCO), Hindustan Zinc, Indian Petrochemicals Corporation Ltd. and Videsh Sanchaar Nigam Limited (VSNL).
Reforms in Economic Policies
Introduction of Fiscal Responsibility and Budget Management Act, 2003
Around the year 2000, one of the major macroeconomic problems that the country was facing was high fiscal deficit. This problem led to inflation, reduced consumption and raise in unemployment. To curb this problem, the Vajpayee Government introduced a major economic reform, i.e. the enactment of Fiscal Responsibility and Budget Management Act, 2003. The aim of this Act was to institutionalize financial discipline, reduce India’s fiscal deficit, improve macroeconomic management and remove the revenue deficit of the country.
Some of the objectives of FRBM Act are as follows:
- To bring in a transparent fiscal management systems in the country.
- To have an equitable and manageable distribution of India’s debt.
- To give flexibility to the Reserve Bank of India for managing inflation in India.
Due to the introduction of this Act during the Vajpayee government tenure, public sector savings surged from 0.8% of GDP in the year 2000 to 2.3% in the year 2005.
The aim to enact such a law was to keep the fiscal deficit under 3 percent. Even though the successive governments were unable to bring the fiscal deficit down to 3 percent due to international crisis, this Act still brought more responsibility and accountability on part of the government.
Introduction of Prevention of Money Laundering Act, 2002
The Prevention of Money Laundering Act was brought in by the Vajpayee government as well in the year 2002. The Act incorporated the Political Declaration adopted by the Special Session of the UN General Assembly, 1999 in the Indian legal system. The main objectives of this Act are as follows:
- To prevent and control money laundering in India
- To confiscate and seize the property obtained from the laundered money
- To deal with any issue connected with money laundering in India
The purpose for introducing the Act was to set out certain procedures, law and regulations to stop the practice of generating income through illegal actions. For this purpose, a Financial Intelligence Unit was set up by the government responsible for receiving, processing and analyzing information relating to suspected financial transactions.
The Vajpayee government launched two projects to improve the infrastructure in India. These projects were Pradhan Mantri Gram Sadak Yojana which was launched in the year 2000 and National Highway Development Project which was initiated in the year 2001. These two projects played an important role in boosting the real estate sector, increased business and commerce and improved rural economy which further led to improvement in the GDP of the nation.
National Highway Development Project
The purpose of this project was to build a Golden Quadrilateral i.e., a network of highways connecting major industrial and agricultural centers of India. It was the largest highway project in India and the first phase of the project consisted of 5,846 km of four/six lane express highways which was completed in 2012.
Pradhan Mantri Gram Sadak Yojana
The purpose of this scheme was to build all weather roads which will connect to all the unconnected villages. 82% of the villages have been already connected by December 2017 and remaining work is in progress and is on track for completion by March 2019.
By introducing new economic reforms, he took India to new heights. Under his tenure, India was able to maintain a GDP rate of 8%, inflation level came down to 4% and foreign exchange reserves increased.
Reforms in Telecom Sector
Vajpayee government, with the introduction of new telecom policy, brought a revolution in the Indian telecom sector. The policy replaced fixed license fees for telecom firms with a revenue sharing arrangement. With this, he paved the way for structural reforms in this sector, which led to an unprecedented growth of mobile subscribers and introduction of competition, followed by the amendment in Telecom Regulatory Authority of India Act, 1999. After the new telecom policy was implemented in 1999, it allowed mobile service company to provide services on revenue share basis instead of fixed fees that the mobile service providers had to pay for providing mobile services.
An Overview of Telecom Regulatory Authority of India (Amendment) Act, 2000
Before the amendment, TRAI exercised both regulatory and dispute resolution functions. However, the amendment Act established the Telecom Dispute Settlement Appellate Tribunal to deal with the dispute resolution. The amendment act classified TRAI’s functions into four main categories:
- Make recommendations on various issues relating to telecom sector.
- Give it general administrative and regulatory powers,
- Give it the power to fix tariffs and rates for telecom services,
- Any other functions entrusted by the Central Government.
IT Sector Reforms
He gave great emphasis on the importance of technology in preparing India for the millennium. From 1999 to 2004, he made various attempts to change and facilitate the rise of Indian Information Technology sector. The IT industry in 1999-2000 was unsteady at around $6 billion which is now an industry of more than $150 billion.
Another important reform brought by him was setting up of Special Economic Zones (SEZs). SEZs were intended to provide a comprehensive infrastructure at one place for export production, such as procurement of duty free equipment, raw material, components, etc. This resulted in improving the competitiveness of Indian IT exports.
Late Sh. Atal Bihari Vajpayee bridged the two cliffs of thought i.e., the right wing and the left wing. It was his conciliatory approach that during his second term as the Prime Minister, he ordered nuclear tests in May 1998, which was considered as a strategic masterstroke to blunt Pakistan’s nuclear ambitions. However, we have also witnessed his soft spoken strength when he did not stop his peace talks with Pakistan to resolve the issue of Kashmir. The same conciliatory approach and bold nature of Atal Bihari Vajpayee can be witnessed when he called a special session of Parliament in the middle of the India-China War in 1962.