Why Thomas Isaac: Kerala finance minister has been a prominent voice on Centre-state relations. In the GST Council meetings, the four-time MLA has spoken out against incentivising digital payments and opposed the idea of a sugar cess. Isaac, who represents Alapuzha in the state Assembly, has been critical of the criteria in the 15th Finance Commission for the devolution of Central funds. Isaac has also been in the news for the hill highway project in the state.
Kerala finance minister Thomas Isaac talks about ‘the constant shift in the Left’s position’ and the need to ‘reinvent the system’, asserts that the Left can fight ‘rabid fascism’ while retaining its identity, discusses the hill highway project undertaken by the state and slams the Centre for ‘shabby’ implementation of GST
ANIL SASI: Some of the decisions taken by your government are not traditionally associated with Left governments — land acquisition for highways, having a Harvard economist (Gita Gopinath) as an advisor, single-window clearance for industries. What prompted this?
There has been a constant shift in the Left’s position. This is not the first time, the position of the Left has been evolving over time. If you look, traditionally, the Left tries to mobilise people on the basis of redistributive goals. The Left is not there to take charge of production or to develop industries. In agriculture, industry etc the Left mobilises workers to ensure that they get a fair share of the distribution. Over time, that system has evolved. We have done it well in Kerala. The average citizen in the state enjoys a much better standard of living and quality of life as compared to the rest of India. We are very proud of that achievement.
Now, there are two things happening. One is the uneven development of the Left movement in India. Secondly, our success is raising expectations. For example, now that everybody is literate, people are not satisfied with ordinary classrooms. They want a much higher quality of education.
Life expectancy has risen to 76-plus, and there are new lifestyle diseases which cannot be treated in the traditional way. So, you need to totally reinvent the system. The youth today are educated and their job aspirations have gone up, they are not satisfied with the employment opportunities that their parents had. They want quality jobs that match their educational qualifications. If the Left doesn’t have a programme to meet these challenges, then we will be undermining ourselves. One has to reinvent and address these challenges.
Now, these challenges are not a question of redistribution. Creation of quality jobs will mean that you will have to move away from the traditional labour-intensive industries or the highly polluting chemical industries into industrial sectors such as knowledge industries, service-based industries, highly-skilled industries or value-addition industries. This cannot be done by the public sector alone. You need to have private investment. The Left says you can’t do what many others are doing in the rest of the country — give up on labour rights, environmental laws etc. So then, how do you attract them (the industries)? The opportunity lies in creating the best infrastructure, physical and social. The challenge is to revamp the entire infrastructure while keeping the past values alive. This means you will have to reposition yourself, rethink some of your stances… We are not apologetic about it. We try to build up on our achievements. So you are right, we have shifted some of our positions.
HARISH DAMODARAN: You said one has to move away from the traditional sectors. But why don’t you look at more traditional industries such as pepper where Karnataka has overtaken Kerala. Another example is coconut, where the production in Kerala is nowhere close to that of Karnataka and Tamil Nadu. Why doesn’t Kerala build on its strengths and focus on agri-based industries?
Agriculture in Kerala cannot survive unless you do value addition — socially regulated modernisation. That’s the Left alternative. Yes, we will go for most advanced technology but we are not going to disregard our traditions; we will protect them. For coffee, we are going to make Wayanad coffee a brand. For coconut, unless Kerala learns to make value addition to every piece of coconut, the farmer is not going to have a decent life. So, value addition is part of the agenda. That’s the only way Kerala’s traditional crops are going to survive because protected market is gone, and structural adjustment is very difficult.
RAVISH TIWARI: In the past, when the Left has tried to recalibrate itself, it has been jolted, like in Singur and Nandigram.
In West Bengal, when we wanted to change… the change was very fast and many people could not accept it. Land has to be taken if industry has to come up but farmers and people need to understand and accept the logic for that… The Amaravati model is a fairly good model of land pooling. I went there to study it; it is well-compensated. We have to think of those models.
We can debate, engage with people who protest and then make an offer that they can’t refuse. Two times, three times the price… But it puts a heavy fiscal burden on the State and there are financial constraints.
MONOJIT MAJUMDAR: In April this year, you said that the government cannot provide compensation for the land that will be acquired for the hill highway project, and that people should support the development project by voluntarily giving up their land.
The hill highway project passes through areas which are mostly under-developed and the people want roads in those parts. They have been voluntarily giving up the land so that the roads can come up there. The collaboration with the population is good. The fact is that when the road comes, the prices (of land in the area) will go up. There will be price escalation in real estate and therefore we will continue it.
Of course there would be people, like the marginal farmers, who will be compensated. But in stretches where the roads have already been built, the prices in the area are going to go up.
I didn’t make a statement like that. Somebody asked me if we will apply the same rate there (hill highway project), I said no.
MANOJ CG: Every secular party in this country is thinking about ways to fight the BJP. Traditional rivals such as the SP and the BSP have joined hands, the JD(S) and the Congress are coming together. When every party is willing to shed their reservations, why is the CPM, despite being the most consistent, credible voice against the Right, still being rigid?
We are different, and we want to be different also. All the other political parties are in the same boat when it comes to economic reforms or economic policies in India. Which party is denouncing neo-liberalism in India? Now you may have a debate on what is right or wrong, but we have chosen an economic platform and that is the platform on which we are trying to mobilise people. Therefore, we want to differentiate ourselves.
Even in the past when we supported the Congress, we didn’t join the government. We have done it unconditionally; we haven’t taken anything from them. We have always differentiated ourselves from the Right parties. It should be done all the more now because unlike in the past, even regional parties have succumbed to neo-liberalism.
Secondly, we are introspecting. It is on the basis of this (introspection) that our cadres, our movement is being built as an alternative. At the same time, we have to fight this rabid fascism that is coming up in Kerala. We are introspecting… when the Congress is ruling, you join the others and when the BJP comes, you join the Congress. In the process, what has happened is that the distinctive feature of the Left platform got blurred. It undermined the Left influence in many parts of India. Therefore, after a critical review, (we decided) that we had to keep our distinct identity and try to mobilise people.
The threat of the BJP is becoming too imminent. This is a different animal; not something that we have seen so far. Therefore, we have debated democratically and come to an understanding… Yes, as in the past, we will not have any alliance with parties but we will adopt electoral tactics so as not to split the votes and see the BJP defeated.
MANOJ CG: Historically, hasn’t a united front been the answer to fighting the Right?
A big battle is going on. We will definitely see to it that the BJP is defeated.
LIZ MATHEW: What would be the CPM’s or the Left’s role in the run-up to 2019?
Very complicated. We are critically examining our experiences; there will be a need for a united front with other parties. But, we will never give up on our identity, the fact that we are the Left.
MONOJIT MAJUMDAR: In a country like India, where the pace of development is different in different states, there is always going to be this debate about rewarding performance and the need for equity. You would also agree that the more developed states are always going to be in a better position to keep increasing their leads while the backward states are always going to be struggling to catch up. So isn’t that a question the Finance Commission, which is mandated to decide the devolution of funds from the Centre to states, also has to look at? The need for ensuring equity so that more developed states don’t keep on increasing the gap with the less developed ones.
I cannot claim to be Leftist if I deny the importance of equity of distribution. In any federal system where redistribution takes place, the backward, lagging, resource-scarce states will have to be given more. So if they (backward states) are given more weightage, it’s welcome. I have never said reward states which have achieved more, that’s not the problem at all. We stand for redistribution to the poorer states. Fine, but don’t make that the only criteria. (On April 10, Kerala had called a meeting of finance ministers of southern states in Thiruvananthapuram to discuss their response to the terms of reference of the 15th Finance Commission. The minister had then said that the southern states were being “penalised” for successfully implementing national policies.)
There were two components to the distribution formula. One was income. Two, population. The population basis is 1971. Now when you move from 1971 to 2011, there is a perfect correlation between population transition and economic stature, except a few outliers such as Gujarat. Therefore, virtually, the 2011 population becomes a proxy for backwardness again. So you have a formula where the only consideration is backwardness.
Then, how am I to run a government? There are minimum services that have to provided from revenue; that cannot be borrowed. That (revenue) is required. So, I’m not against equity, in fact I am for it. All we are saying is that there is a procedure adopted by all finance commissions, stick to that tradition.
ANIL SASI: Wasn’t the 2011 figure partly used by the 14th Finance Commission?
Yes, so leave it to the Finance Commission. Let the Finance Commission choose what is the kind of percentage to be given to 2011 and 1971. Why bind their hands?
AANCHAL MAGAZINE: You have been quite vocal in the GST council meetings. In the last meeting you opposed the proposals for digital payments and sugar cess. How easy or difficult is it to put across your point during GST council meetings?
Well, when the GST council was formed, there were 15 states. They could take politically different positions from the Centre and, therefore, there was a meaningful consensus. Now, the situation has changed. We have become a very small minority. But so far, I admire the approach taken by Arun Jaitley, who could have taken decisions based on the majority. He has always taken on the path of discussion and tried to reach an understanding.
SUMIT JHA: Staying with GST, what has been the shortfall for Kerala in terms of revenue in the period between July and February? Have the states that have suffered a shortfall been able to identify the reasons for that? Some of the states have not suffered shortfalls and met their targets.
Kerala revenues were rising by 20% per annum. That’s very good, gives a lot of elbow room to do many things. Then, it came down sharply. Our revenue has to grow by 20 to 25% . GST, we thought, will provide that, because Kerala is a destination state. 80% of our marketable consumption comes from outside, so we thought we would start
Secondly, Kerala has high density services, and therefore (with GST) it would be better off. Our government programmes, right from the first Budget, were aimed at increasing revenue by 20 to 25% or minimum 20% . But after the GST came, it increased by only 10%, or even less. The reason: the GST system is not in place. Whoever would ever imagine such a shabby implementation of the most important programme of the nation. One year into the programme, and we are still debating about the return form, we have not finalised it. It will take another six months to do it.
LIZ MATHEW: In March, an International Monetary Fund report said that India has survived the worst and that the economy looks in good shape — the effect of demonetisation is fading. What do you have to say about it?
But why should we go through this ordeal? Why do we have to suffer all this, to prove what point? Tell me, has there been any instance in the world where for something like demonetisation to work, a nation goes through a crisis, money loses its worth… Just imagine, the total quantum of the national loss; it’s a criminal act. It was such an audacious act, nobody would think it would be implemented unless there was a big reason. This kind of crude step has not been discussed even by decent economies. Even the economies that supported demonetisation would not have advised him (the Prime Minister) to implement it.
SHOBHANA SUBRAMANIAN: Are you expecting an early election?
Well, I don’t know. Though the BJP thinks they have captured the entire country, Karnataka shows us that the moment you have Opposition understanding or unity, they (the BJP) are a small minority. They have not improved very much from the 31% support base with which they came to power. So, the only factor which permitted them to actually capture power was Opposition vote split. Now, Karnataka election would, I think, speed up this process of understanding between Opposition parties, and prevent the split.