Jose Sebastian, economist and former faculty of Thiruvananthapuram-based think-tank Gulati Institute of Finance and Taxation (GIFT) in interaction with TNIE explains what’s the reason behind Kerala’s economic mess and offers possible solutions.
The lockdown is making the lives of ordinary people miserable. During the last 46 days, at least 25 people have died by suicide. What is your take on this scenario?
I reckon we are going to witness the worst. To me, it is nothing but failure of the government the hypocrisy of the so-called progressive Kerala society. There is no collective anger against the government which cannot think beyond Rs 500 worth of kit. What Kerala is undergoing is a lockdown of ideas. The academicians, intellectuals and economists have no solutions to offer.
What concrete solutions you can offer. Suppose you are occupying the chair that Pinarayi now occupies, what you would have done?
See, the present problem is not due to the paucity of resources as being made out to be. The private sector- individuals and business entities are flooded with funds. This is evident from the bank deposits in Kerala. The problem is with the public finances. As I have argued elsewhere, Kerala is not mobilizing adequate public resources. Over 60% of the state’s own resources are mobilized from four items-liquor, lottery, petrol and motor vehicles. Poor people in no other Indian State contribute as big an amount to public resources as those in Kerala. Due to the competitive populism of coalition politics, the state is not able to mobilise adequate public resources. But the main problem is that the resources picked up mainly from the pockets of the poor and marginalized are pocketed by the middle class and rich. Kerala society has been magnanimous to the educated unemployed and accommodated maximum in the government sector. In 2018-19 Kerala spent 55.69% of total revenue for salary and pension whereas Karnataka spent only 28.43% for this purpose. If I were the Chief Minister, I would not have any qualms of conscience to tell the employees and pensioners that this cannot continue. The budgeted expenditure for salary and pension in 2021-22 is Rs 39845.75 crore and Rs 23105.98 crore respectively totalling Rs.62951.73 crore. An average salary and pension cut would fetch the government Rs 6295 crore. I would have just introduced a cash transfer system wherein every person who lost livelihood would be given Rs 5000 each for three months costing Rs.6000 crore. This would have benefitted 40 lakh families. This will activate the whole economy. The present gloomy picture would completely stop and people would plunge into economic activity. And in the process tax collections would also go up.
What prevents the government from thinking innovatively?
The governments in Kerala irrespective of ideological persuasions are prisoners of service organisations. They simply cannot think innovatively. Actually, the present crisis itself could have been avoided if pay revision was abandoned. Around Rs 4850 crore which would gone to ordinary people have gone to the government employees and pensioners.
Last week, the Chief Minister said that government employees are just drawing their entitlements. Can any government function without paying salary and pension?
Chief Minister is fooling ordinary people. You cannot have a high salary and a large number of government employees at the same time. We could have functioned with a much fewer number of government employees as in Karnataka. If we have a bulging number of government employees and pensions, it is because of people’s magnanimity.
You have been campaigning for a universal pension instead of the present statutory pension? Can you explain the rationale?
The present statutory pension does not have any moral basis or economic rationale. In all western countries pension is financed by the pensioners and not exchequer. Every working employee whether in the public or private sector has to contribute to the pension fund to receive the pension. In India, it is just assumed that pension is a deferred salary. We have ended up in a situation wherein people who drew a salary for 30 years are given half salary and DA for another 30 years or even 40 years. After meeting this huge expenditure, there is hardly anything left with ordinary people. It is high time we have a fresh look at this unjust system. The statutory pension was started at a time when the life expectancy was just 32 years in 1951. An average pensioner would have lived maybe 5 or ten years after retirement. Now they live for 30 or 40 years. The number of government employees was small and the salary they drew was reasonable. Over the years, the whole scenario has changed. Government employees became a pressure group and are now cornering a disproportionately high share of the public exchequer. The pension has to be redefined as society’s magnanimity. There is no moral basis or economic logic for the huge gap between welfare pension of Rs.1,600 and average pension of Rs 42,000 for government employees. There are thousands of families in Kerala receiving Rs 50,000 to Rs 1 lakh as pension. Universal pension will be a game-changer to Kerala society and economy.
You don’t seem to blame the Central Government which is mobilizing huge resources from petroleum products that are not shareable with the states. The brunt of the price increase in petroleum products is borne by the state?
Yes, there is a valid reason to claim part of the resources the centre is mobilizing. For this purpose, the states should put up a united front.
There is a general perception that in the backdrop of the pandemic it is not possible to mobilise public resources. What is your reaction?
Ans: Yes, it is not possible to mobilise public resources from taxes which will impact the poor and marginalized. But it is possible to mobilise more public resources from the middle class and rich who are the major beneficiaries of government expenditure. Property tax, electricity duty, targeting the subsidies in education and health sectors only to the deserving sections, lease rent on government land and mining royalty are some of the sources. There is nothing wrong with privatizing public sector enterprises and selling land to moblise public resources. After all, people are the assets and not public sector enterprises or public land.
This interview was published by The New Indian Express
Views expressed by the author are personal and need not reflect or represent the views of Centre for Public Policy Research.