Analysis | Satheesan turns Kerala's Ronald Raegan, junks socialism for neoliberalism

Chief Minister V D Satheesan has led Kerala into a radical economic transformation, step by step. First, he released the 'white paper' on Kerala's fiscal health, which painted a hopeless picture of Kerala's finances: committed expenditure eating up 77 per cent of total revenue, plummeting revenue growth and immediate liabilities of ₹87,012 crore.

The Chief Minister was not just condemning the LDF government's handling of the economy. He was also discrediting the LDF's government-funded socialist model.

And then, in his maiden budget speech on Friday, the CM withdrew this 'hopelessly debt-ridden government' from an active role in the state's development. He has asked the private sector to step in. No other government in Kerala has been as inviting.

Satheesan's new policy adheres very close to the neoliberal model that the Left spurns. Less government, tax incentives (in all the proposed investment corridors), dilution of socialist programmes (land laws that had applied restrictions on exploitative use will be amended) and profit maximisation (the Budget, for instance, encourages the sale of low-alcoholic beverages) are blood trails of a neoliberal economy. 

Nonetheless, the most intense trait of an economy possessed by neoliberalism is privatisation. Such a behaviour has not been revealed for now. For the moment, Satheesan has no plans to privatise public sector units, even disinvest loss-making ones as hinted in his 'white paper'.

Performer to Impresario
Under the new policy, the government will exit the stage and limit itself to being the stage manager, providing all that is required for an event and nothing more. Do not expect the government to perform on stage like the previous LDF government did. 

The largest allocation for a single project in Satheesan's maiden budget is ₹600 crore, for the free bus rides for women. On the contrary, there were on an average six ₹1000-plus crore mega projects each in the 12 budgets presented in the last 10 years of the LDF rule. All of them executed through KIIFB.

And this government-nourished funding body that was employed by the LDF to maximise government presence on Kerala's development stage, has been benched for the time being.

In his Budget Speech, Satheesan said that KIIFB is so saddled with liabilities that "we will constitute an Expert Committee to initiate comprehensive structural reforms and overhaul of KIIFB's current operational framework." So even if KIIFB makes a re-entry, it will be a brain-altered entity.

Reagan's hope, Piketty's doubt
With KIIFB rested and the government too short of funds, Satheesan wants private investment to drive his four big projects - Mission Samudra, Southern Kerala Economic Corridor, Rare Earth, Critical Minerals Corridor and Aviation Hub. 

The government, like any stage manager, will create the necessary facilities for the private sector to perform.

Satheesan, like President Ronald Reagan, banks on the trickle-down theory. He feels that the entrepreneurial energy that he could attract and stimulate with some strategic tax incentives in his proposed 'port city' and development corridors will spur growth and generate jobs to fill Kerala's 'empty' coffers. And from there, the wealth can be redistributed in the form of free bus rides, higher welfare pensions and free health insurance for the poor.

"This Government is committed to stimulating the economy through modern and innovative strategies — attracting large-scale investments across various sectors, mobilising resources into the exchequer, and thereby ensuring equitable distribution of this generated wealth," Satheesan said in his speech.

However, highly reputed Left economists like Thomas Piketty had sneered at trickle-down economics. Piketty had argued that, because private wealth ignited by state incentives grows faster than the economy or the average wages, burgeoning private investment can only widen inequality.

Tirupati miracle
The CM, however, sounded so confident of the animal spirits that the private sector could let loose that he did not even allocate a single rupee for his ambitious project to adopt the Tirupati model for the development of Sabarimala, Guruvayur, Kottiyoor and Thiruvallom.

"The government does not have to shell out any money for this. Pilgrims themselves will come forward, and there are other agencies," the CM later said during a press conference. It is also why he had kept only ₹10 crore for his most ambitious project: the Department of Elderly Welfare. He wants the private sector to bring in the money.

And he is unapologetic about his new policy. "We need private investment," he said after his budget speech. "What new project can a government saddled with immediate liabilities of ₹87,000 crore and a total debt of ₹5.07 lakh crore start in the public sector . Other states are competing among themselves to get investors. But there is resistance when private investors come here. That is not our policy. Private investment will be encouraged. It's the only way to rejuvenate the economy," the CM said.

Private prayers
His trust in the ability of private investment to ignite growth is so high that he had not announced any measure to mobilise additional resources. There are no new impositions in Satheesan's maiden budget.

Yet he anticipates more own tax revenue. If K N Balagopal expected ₹94,002.47 crore as own tax revenue in 2026-27, Satheesan now anticipates ₹99,002.47 crore, this is nearly 5.5 per cent more than what Balagopal expected. 

Satheesan's expectation is that a combination of 'private investment'-triggered growth and a more rigorous tax administration will improve his own tax revenues. 

Though he had lamented about Kerala's poor capital expenditure (the 'white paper' said it was only 1.3 per cent of the GSDP and the worst in Kerala), Satheesan has not bothered to muscle it up his Budget. 

In Balagopal's last budget, capital expenditure was  ₹22,348.38 crore. Satheesan's figure was virtually stagnant, ₹22,565.59 crore. This was yet another indication that he was expecting private investment to do the job for him.