NEW DELHI—The economic relief measures announced by the Narendra Modi government for addressing the slowdown exacerbated by the coronavirus pandemic and lockdown are not enough and states should be allowed to borrow more to fund their own welfare measures, Kerala Finance Minister Dr. T.M.Thomas Isaac said in an interview with HuffPost India.
“It is insufficient,” said Dr. Thomas Isaac of the allocations of benefits transfers announced by Union Finance Minister Nirmala Sitharaman on 26 March, which have been collectively referred to as the Pradhan Mantri Garib Kalyan Yojana.
Speaking about the allocation of Rs 500 per month ex-gratia amount under the Jan Dhan Yojana for three months, the Kerala Finance Minister said, “...everybody had expected a much higher transfer. I was, quite frankly, thinking something of the order of Rs 5000 per person. Now this is, in fact, when compared to, say, the transfer that takes place in the US or UK, very very small.”
In comparison, he pointed out, Kerala was paying Rs 1200 per month for six months as old age pension and other benefits, and paying that amount to 55 lakh beneficiaries in advance.
Dr Isaac also said provision of Rs 50 lakh insurance, announced by union finance minister Nirmala Sitharaman, for health care workers was “very, very minimal” and what was required instead was “pumping in money in the National Health Mission (NHM) through the health departments of the state governments. Because it is not enough to quarantine everybody in the house.”
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Home quarantine, he argued, is “one half” of the solution while the other is being on the “lookout for anybody who contracts COVID while in quarantine”. And subsequently isolating and feeding them. What was needed, he said, is a “massive testing program” otherwise, “you will be breeding these things in the houses”.
The Jawaharlal Nehru University trained economist and former professor also argued strongly, while speaking about the Kerala government’s Rs 20,000 crore economic relief programme, for letting state governments borrow more money from varied sources.
When asked if the Modi government’s announcements indicated that it will follow an expansionary fiscal policy in the fiscal year 2020-2021 as well, he said, “See, Nirmala Sitharaman, or anybody in the centre, has not given any indication that they would follow cooperative federalism. All these things that the centre has announced are going to be implemented by the states. And they are going to raise the fiscal deficit. Anyway, the one lakh crore expenditure that is also going to come from outside. They are already giving up...the question is whether they will allow the states also to borrow more. It will be very sad if they don’t.”
He went a step further to say, “Not sad, highly worthy of protest.” And explained his reasons for saying so by pointing out that, “...you have got a major recession and here the central government is following an expansionary fiscal policy while at the same time they are forcing the states to cut expenditure. This is a crazy way of running the country. And therefore, I think good senses will come. But they are going to be stingy with the states.”
But Dr. Thomas Isaac also appreciated the decision to pay in advance, front-loading as it referred to in official parlance, Rs 6000 (2000/month) under the PM Kisan scheme. He also commended the decision to give rice to the needy. “That’s a good move because warehouses are overflowing with stock, that is one way of usefully disposing the stock,” he said.
Edited excerpts from the interview:
What do you make of the economic relief measures announced by Finance Minister Nirmala Sitharaman to address the economic distress exacerbated by the coronavirus pandemic and related lockdown?
It is insufficient. Now there are only, I see, two major components which are going to have a big impact. That is, one, income transfer of Rs 500 per month through the Jan Dhan account for 3 months. That’s an additional expenditure which will have to be incurred for paying crores of people. But everybody had expected a much higher transfer. I was, quite frankly, thinking something of the order of Rs 5000 per person. Now this is, in fact, when compared to, say, the transfer that takes place in the US or UK, very very small.
Now, I say only this because the other one, Kisan Samman, is only something which is budgeted and front-loading the Rs 2000. Rs 6000 is budgeted (for three months), they are going to give it in advance only. Second is the distribution of rice. That’s also welcome. That’s a good move because warehouses are overflowing with stock, that is one way of usefully disposing the stock.
But look, for example, what Kerala has done. We are transferring nearly Rs 7200 to 55 lakh beneficiaries; As old age pension and so on or other benefits.
Now this is front-loading. One had to be given in the future or...clearing up the arrears. But the important thing is that we are putting it in the hands of nearly 55 lakh beneficiaries. It should cover more than half the households in Kerala a sum of Rs 7200. This is something substantial. So the centre also should have given a much higher transfer. That’s my first point.
Just to be sure, you are saying that you are transferring Rs 7200 per month to every family, is that right?
No, Rs 1200 we are paying per month. So the amount that adds up for 6 months, Rs 7200, is being front-loaded. You know, the state government cannot, unlike the centre, because of hard budget constraints, declare additional expenditure over the budgeted amount. We cannot freely borrow, There is no way of raising resources other than what is in the budget. And therefore this is the only way the state government can create a package. We are front-loading the expenditures for the current months so that money reaches the people.
Secondly, now, this distributional rise will leave out a large number of marginal groups. Like the migrants, street sweepers, destitutes and so on. And that’s very important. So we are, in Kerala, starting community kitchens funded by the local and state governments in partnership. These are run by women’s groups. No common dining. That is prohibited. You can take the food and go or we will deliver to your place if you book it through Whatsapp. If you have money, you can pay Rs 20, which is the price. If you don’t have money, that’s fine, we will serve you. So this is coming up very rapidly, soon it will be covering the entire state. We have ordered all the local governments, particularly in the cities, to pick up the homeless people sleeping in the streets and hire kalyana mandapams and put them there, and they be given food. We are also targeting our migrant workers. We are going to supply them food during this period. We are also giving food kits for cooking to every house. Now the central program will be helpful to us because we don’t have to buy the rice and one kilogram of grams but we will buy other condiments and so on, and supply them to each family in a kit. Now besides that we are directly giving the food by preparing in anganwadis to families.
This is what is lacking in the central program: their allocation for health is very very minimal other than this Rs 50 lakh insurance for health workers.
That’s only for three months. What is required is pumping in money in the National Health Mission (NHM) through the health departments of the state governments. Because it is not enough to quarantine everybody in the house. Even WHO says that is one half; other is you have to be on the lookout for anybody who contracts COVID while in quarantine, isolate and feed them. And a massive testing program. Otherwise what will happen is you will be breeding these things in the houses.
What is required is pumping in money in the National Health Mission (NHM) through the health departments of the state governments.
In slums, where the density of population, in Kerala people live so near each other, that this quarantine in the house doesn’t mean anything. That’s a concept used for, say, apartments and so on. In the village, people don’t even consider....
Therefore you need to…conduct surveillance.
Test on a mass level in formal institutions.
That’s right. Test so that you know better. Hiring enough temporary staff, healthcare staff, people— you need money for that. There’s nothing.
In Kerala, we have used civic groups for this. We are going to have very systematic health monitoring through the Kudumbasree women’s self-help groups. That is all drawn up.
These are the three issues where they are doing something but not sufficient enough. Kerala is doing something extra also.
You mentioned the inadequate attention paid to health and the absence of mass level testing of people for coronavirus. In the initial weeks, the ICMR cited limited testing capacity to explain why it was not testing at a mass level. What do you make of this argument?
Okay, let me put it this way. India has limitations. Okay that’s accepted. But set up a symptom-based surveillance system—those who have fever, cold, cough, isolate them. It should be possible to do that. There must be somebody doing the surveillance and giving medication and so on. And to the extent possible, you do the testing of all those people—I am not saying you go testing everybody on random—but we can test people who are showing the symptoms. If we are not able to do that, then your case is lost. There is nothing you can do. So that capability must be raised.
You open new laboratories, testing places, expand it, spend money there. The allocation for NHM is nothing. Even in the Nirmala Sitharaman’s package. In fact, allocation for the health sector has hardly increased in the last budget.
Prepare for the worst. Instead, they are...I don’t know if they are preparing at all.
...it is not enough to quarantine everybody in the house. Even WHO says that is one half; other is you have to be on the lookout for anybody who contracts COVID while in quarantine, isolate and feed them. And a massive testing program. Otherwise what will happen is you will be breeding these things in the houses.
In the past couple of weeks, one thing that has come into wider attention is that health workers aren’t getting enough PPEs nationally. In Kerala’s context, that concern is not often raised. So what are you doing right to protect the health workers in Kerala while addressing the pandemic?
See, one, Kerala traditionally has a much robust public health system. And this new government of ours has invested something like Rs 4000 crore in addition to the normal expenditure in recruiting new doctors...and getting better medical equipment. So it has improved.
Now what has been done is that they have been preparing various plans for various contingencies. I think they have now moved to plan B. They have identified plan A, Plan B or plan C. They have identified what all hospitals could be completely converted into COVID case hospitals. Whole lot of hospitals are lined up for this. This is planned meticulously.
Secondly, hospital doctors and nurses are given training meticulously. I don’t think there is anything happening in the country to train people. Very senior doctors are deputed for that. Mask, sanitizers and clothing—I think they are given to everybody. Because we had an experience with Nipah, I think the medical is having a fair stock of all this. So we are prepared for this. Not fully; nobody can be fully prepared. But there is care given. Doctors and nurses are not left to fend for themselves. That is part of the plan, their health and so on.
One strength of Kerala’s health system is that local governments are involved. All the hospitals other than medical colleges are now devolved to local governments, districts, blocks, gram panchayats—therefore they have a say. Of course, they cannot determine the medical, treatment protocols and so on but they are involved in...say, there is no medicine then the local panchayat will buy the medicine. There is no food in the hospital, they will ensure that food is provided. Every hospital has a hospital development committee. So this local government participation is very important.
I want to discuss in greater detail the Rs 20,000 crore economic relief package that the Kerala state government has announced. In a recent interview, Prof. R Ramakumar, the member of the state planning board of Kerala, mentioned that the overall sum of Rs 20,000 crore will be spent based on two assumptions: first, the need to spend more over the first two quarters of financial year 2020-21 because of an extremely harsh economic slowdown and second, possibility of discarding the FRBM limits in the later part of the year.
What we have done is, how do we finance this amount of money? We are going to borrow upfront. We are permitted Rs 27,000 crore. So in the first tranche, the first two quarters, they have allowed half of it. Rs 14,000 crore, I think. So most of it we are going to borrow upfront in the month of April itself. I hope they don’t prohibit us. There is no need to. They have permitted us and it should be left to the state governments to borrow.
...our borrowing has been cut by the centre because of various reasons. They say we over borrowed in 2016-17 and then GST compensation is not there, devolution has declined. It’s in a mess, the state, therefore there are arrears. We pay all these arrears due as people’s scholarships, subsidies and all, front-load some of the programs. This food program is something which has to come in August but we decided, “no, it has to come in April itself.”
So like that, some of these programs we have front-loaded. We have allowed 8 crore employment days for NREG. Now the moment this lockdown is lifted, in the month of April, we are going to start a massive employment program by using this and also supplementing with our own money. So that entire 8 crore is going to be used up before the onset of monsoon...
...We are going to clean 50,000 kilometers of canals. A plan is drawn up for all this. So we are front-loading all these things.
So it is essentially front-loading your borrowing and front-loading many of your programs and then paying up arrears. Actually we will see to it that Rs 20,000 crores reaches the hands of the people. Now, this is not outside the budget. What is important is that you are able to put this money at this juncture into the hands of the people.
From the central government’s announcements so far about the economy, do you feel it is open to the possibility of borrowing more and spending, not worrying about increasing fiscal deficit, and letting the states to also do the same?
See, Nirmala Sitharaman, or anybody in the centre, has not given any indication that they would follow cooperative federalism. All these things that the centre has announced are going to be implemented by the states. And they are going to raise the fiscal deficit. Anyway, the one lakh crore expenditure that is also going to come from outside. They are already giving up...the question is whether they will allow the states also to borrow more. It will be very sad if they don’t.
Not sad, highly worthy of protest. Reason being that you have got a major recession and here the central government is following an expansionary fiscal policy while at the same time they are forcing the states to cut expenditure. This is a crazy way of running the country. And therefore, I think good senses will come. But they are going to be stingy with the states. But I think there is no other way than allowing states to borrow more. We have demanded 1% of the GDP additional, I don’t know if they will commit that. But they will have to. Even in 2008, states were permitted because the state is on the frontline, who knows what is the need at the ground, when to intervene, how to intervene. Though we have been financially straitjacketed, a state like Kerala, but nevertheless we brought till the Panchayat Kudumbasree and so on; we have been able to implement the program.
They should, in fact, come and hold hands.
In recent weeks, people across the spectrum have noted that the state as an institution in Kerala seems to be very functional and responsive to citizen’s needs despite it being a small state. I am asking this from the perspective of people not residing in the state. So what makes the state work in Kerala?
One, the nature of the government machinery itself. See, it’s all governments, but you will agree with me this government is very different from the Indian government, or within India itself we are different from the Bihar or Uttar Pradesh governments.
Because of affirmative action dating from the pre-independence period, the government is not in the clutch of elites. Of course, elites have more representation but share of representation of lower castes and poorer people and so on is very important. And there has been a lot of unionisation. You may say unionisation is bad, but it has also linked the bureaucracy to the larger movements in the state. And it is also a fact that there is no monopoly of power, power changes and there is tremendous pressure from the opposition for the state to perform. Okay, you don’t perform, you are out of power. That is there in Kerala. This has shaped the state machinery and state government in Kerala. And all over there is this progressive hegemony in Kerala.
Now the right is not all that right in Kerala. Even the BJP will have to swear by many things they will be abhorring in the rest of the country.
It is a very vibrant society. The density of associational forms—clubs, libraries, local organisations, co-operatives, and unions and so on. The government is able to link itself with this vibrancy so that the effectiveness of government action increases manifold. The schools established in Kerala were through social movements as well as government support. How did health spread so much in Kerala? Because social movements demanded health. You can build a health PHC in a north Indian village and there is no doctor, nothing is going to happen. In Kerala, if the doctor is absent be sure there is going to be some trouble there. That’s very important. It is the demand from below. So all these things add up to give Kerala its distinctive flavour.