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

The Prime Minister's reference was to an article published in the Financial Times.

New Delhi:

Prime Minister Narendra Modi today highlighted how the Goods and Services Tax reforms would create a nationwide "GST Bachat Utsav," delivering benefits across all segments of society including the poor, middle-class, farmers, merchants, and entrepreneurs. During his address, he recalled the early period of his prime ministership in 2014, mentioning a foreign newspaper article that had examined India's complicated trade practices at that time.

The Prime Minister was referring to a piece published in the Financial Times authored by experienced South Asia correspondent Victor Mallet. The article, titled 'Notebook: India is a nation in need of a trade deal with itself', described the remarkable logistical challenges businesses encountered when transporting goods within India. The complications were so severe that according to the report, a French technology company found it more economical to ship components from Bengaluru to Europe and back to Hyderabad—a journey spanning several thousand kilometers—rather than moving them directly across the 570 kilometers separating the two Indian cities.

"Friends, this was the situation back then because of the complexities in taxes and tolls," PM Modi explained. "At that time, countless companies and millions of citizens faced daily hardships due to the labyrinth of various taxes. The increased transportation costs for moving goods between cities ultimately burdened the poor and consumers like yourselves. Freeing the country from this predicament was absolutely necessary."

The article by Mr. Mallet that PM Modi referenced stated: "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 continued by discussing the inefficiencies resulting from congested roadways and limited freight rail capacity, alongside the burden imposed by 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 suggested a solution in the form of a nationwide general sales tax, a proposal that had been discussed for years but never fully implemented. Quoting Onno Ruhl, who was the World Bank's country director at that time, Mr. Mallet noted: "India actually has an opportunity to conclude a free-trade agreement with itself."

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

GST Utsav

In his address, PM Modi announced that from September 22, coinciding with the beginning of Navratri, consumers would start experiencing the impact of the latest reforms, dubbed GST 2.0.

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

Describing it as 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."