NEW DELHI: When Union Minister Piyush Goyal declared that the Prime Minister had demonstrated “good economics can also be good politics” in reference to the GST, it was more than just a soundbite. It was the culmination of an eight-year journey that transformed one of India’s most contentious reforms into a cornerstone of its fiscal architecture and a surprising political asset.
The Genesis of a Gamble
Recall the summer of 2017. The rollout of the Goods and Services Tax was met with apocalyptic predictions. Opposition parties, including some within the NDA, forecasted economic chaos. Small businesses feared the compliance burden. The Congress, which had originally championed the idea, now critiqued its execution as a “hasty GST.” For the Modi government, it was the biggest economic gamble since demonetization. The political risks were enormous; getting it wrong could have meant electoral oblivion.
The Long Road to Refinement
The initial months were indeed rocky. The multiple tax slabs were criticized for complexity. The technical glitches on the GST Network portal became fodder for critics. Yet, what followed was a rarely seen in Indian governance: relentless iteration. The GST Council, a federal body embodying cooperative federalism, became a functional, if sometimes fractious, workshop. Over 50 council meetings later, the government simplified procedures, rationalized rates, and expanded the tax base through persuasive and political outreach to states.
The Economic Payoff
The data now tells a compelling story. GST collections, once volatile, have consistently stabilized above ₹1.6 lakh crore per month, signaling formalization and compliance. The tax base has nearly doubled from the initial 6.6 million registrants. The seamless input tax credit mechanism, despite early hurdles, is reducing the cascading effect of taxes, making Indian manufacturing more competitive—a key goal of the ‘Make in India’ initiative. The economic efficiency gained by creating a unified national market is a silent booster to GDP growth, though its full impact is still unfolding.
The Political Alchemy
So, how did an economic reform become good politics? The answer lies in a shift of beneficiaries. The initial pain was borne by a vocal minority—traders and SMEs. The government absorbed the criticism, refined the system, and slowly created a new, larger constituency: the consumer. The simplification of the tax structure, the reduction of prices on many household items due to the removal of tax-on-tax, and the perceived crackdown on evasion through digital trails created a sense of fairness and efficiency for the average voter.
This narrative of a tough but necessary reform, endured for long-term gain, perfectly complements the Prime Minister’s image as a leader willing to take bold decisions. The government didn’t win the argument on GST in 2017; it won it by 2024 by demonstrating persistence and a capacity to learn. It showed that a reform could be initially unpopular yet eventually become a source of credibility.
The Federal Test
Crucially, the GST story is also a story of Indian federalism. The Council’s functioning, though dominated by the Centre, provided a platform for state finance ministers, including those from opposition-ruled states, to negotiate and buy into the process. While disagreements persist, the mechanism has largely survived the intense pressures of India’s competitive politics. This has allowed the Centre to share both the credit and the blame, insulating it from the full force of anti-incumbency related to the tax.
The Road Ahead
The reform is not complete. The long-pending inclusion of petroleum products, real estate, and electricity into the GST fold remains a thorny issue that requires immense political capital. The multi-rate structure continues to be a subject of debate among economists who advocate for a simpler, flatter tax. However, the journey so far has proven a critical point: In today’s India, a government that can successfully navigate the complex passage of structural economic reform can translate it into potent political capital. The GST is no longer just a tax; it is a lesson in the new grammar of Indian politics.
