Modi Backs Goods & Services Tax, Seeks Better Indian Governance

Narendra Modi, the front-running prime ministerial candidate of India’s main opposition Bharatiya Janata Party, said he backs the introduction of a goods and services tax and signaled he’d seek to fight graft to cut poverty, outlining economic goals as elections near.

“As far as BJP is concerned, we are in favor of GST,” Modi, whose party leads in opinion polls ahead of the general election due by May, said at a conference in New Delhi yesterday. A lack of good governance is hurting development and the priority should be to eradicate poverty, he said in another speech in the national capital.

Opinion polls indicate Modi’s Hindu nationalist BJP will get the most seats in the election while falling short of a majority, as voters punish the ruling Congress party for an economic slump, inflation and graft scandals. The goods and services levy is more than three years behind schedule, even after India’s Finance Commission estimated it could yield a 28.8 trillion-rupee ($464 billion) economic gain by easing commerce.

Modi, 63 and chief minister of the western Indian state of Gujarat, said appropriate technology has to be put in place to make the implementation of the tax viable.

The goods and services tax revamp seeks to swap an array of state and federal levies for one at the time of sale. Preventing a product being taxed more than once would spur commerce, while casting a wider net over services would help buoy revenue, according to the Finance Commission.

‘Gujarat Model’

Prime Minister Manmohan Singh’s government had set April 2010 as the target for introduction of the goods and services levy. A failure to push through necessary constitutional changes in parliament is among reasons why the overhaul has stalled.

Modi also said Indian businesses shouldn’t be frightened by the challenges of international trade and see them as opportunities.

Modi was showcasing the “Gujarat model” by talking about good governance, the adoption of renewable energy and female participation, said Raghavan Seetharaman, chief executive officer of Qatar’s Doha Bank QSC, who attended yesterday’s speech.

“He was talking about challenges and the tested model he has experienced and the prospects he foresees,” Seetharaman said. “He knows the definition of issues and his conceptions are clear.”


The BJP has gained strength after picking Modi as its candidate for prime minister. It would win 217 of 543 seats up for grabs in the lower house of parliament, according to an opinion poll released Feb. 22 by ABP News television channel and Nielsen. Congress, in power for a decade, may get 73 seats, its worst ever performance, the poll indicated.

Modi in a speech in January promised voters cheaper goods and 100 “smart cities,” saying the BJP will create a stabilization fund to combat Asia’s fastest inflation and form special courts to try those who hoard goods. The BJP would improve the rail network and power supply in the world’s second-most populous nation, he also said at the time.

Economic growth probably held below 5 percent for a fifth straight quarter in the three months through December from a year earlier, according to a Bloomberg News survey before a report due today. The annual average in the past decade is about 8 percent. Consumer-price inflation has averaged 10 percent in the past 12 months.

Modi is promoting his image as a magnet for investment and a record of stronger-than-average growth in the state he’s ruled since 2001. Opponents allege he’s an autocrat who failed to control deadly anti-Muslim rioting in Gujarat in 2002. He’s denied wrongdoing.

Before it's here, it's on the Bloomberg Terminal.