Opinion | Will economics trump politics on May 2?

This coming Sunday when the votes are counted in the Assembly elections in Kerala, it is anybody’s guess which coalition will win though most of the pre-poll surveys have indicated a majority for the ruling Left Democratic Front (LDF) led by the CPM.

If that happens, it would be a major departure from the Keralites’ practice of voting two fronts alternatively to power. This is something for political analysts to examine and discuss.

But what is undeniable is that despite a weak financial structure, as is the bane of most Indian States, Kerala’s Treasury has been buoyant all these five years and the State Government has managed to spend its way through two floods, a cyclone and of course, now Covid.

Those who are interested in financial management have to concede that the State’s Finance Minister, Dr. Thomas Isaac has been singularly responsible for ensuring that money is available to fund the LDF’s various initiatives.

This writer is no supporter of the political line that he takes. But based on our understanding of treasury and money management, it emerges that the personally affable but politically pugnacious developmental economist has succeeded where most others would have floundered.

One is aware of the controversies surrounding some of his pioneering initiatives including the reactivation of the Kerala Infrastructure Investment Fund Board (KIIFB). The entity has been facing scrutiny by central agencies and this is not the time to sit in judgement over its shortcomings or failures or worse. Let the examination/scrutiny run its course and then we shall know whether there were basic flaws and like any other enterprise, lessons can be learnt to make for corrections.

State Finance Minister for a total of 10 years, Dr Isaac’s role will be marked in Kerala’s history by at least three major moves. These are projects/beginnings which can be tapped by any political formation that comes to power in the State though it may be a fact that a cadre-based party like the CPM may have succeeded in milking them dry to its political advantage as no other party is capable of. That is the political fallout of Dr. Isaac’s economics.

First and foremost is in fact the last of the three major strategic initiatives that he made. Upon assumption of office, he reactivated the KIIFB. As a strategy for resource mobilisation it was a brilliant move, which very few other States had tried.

In mission mode, he on-boarded a retired civil servant of impeccable credentials, Dr KM Abraham to spearhead KIIFB and ensured that money is available for infrastructure development especially in Government schools and hospitals, something which people across the State have experienced. Banks lent money. It raised resources from the market as well. Almost each of the 14 districts in Kerala and 140 Assembly segments have “felt” the impress of KIIFB funds within its boundaries.

At last count, KIIFB had spent about Rs 7500/8000 crores for infra development, the pace picking up as the LDF Government was nearing the end of its term. Backed by good advertisement spend and a few sponsored programmes on TV, KIIFB has become identified in the public mind with shiny premises for schools, up-gradation of State Government hospitals and roads.

During KIFFB’s journey, Dr Isaac also got the State Chief Minister to ring in trading and listing of the Masala bonds of KIIFB aggregating about Rs 2800 crores on the London Stock Exchange. The image of a strongman Marxist leader from a State which is the only one to be ruled by a Left Front in India, at Paternoster Square, City of London — an abiding emblem of global capitalism— is enough proof of the “pragmatism” of Dr Isaac’s economics.

Second is Dr Isaac’s strong voicing of the State’s requirement at federal forums including the GST Council. The compensation to States which was agreed upon ultimately for the passage of the GST Bill was on account of the strong pitch made by Dr Haseeb Drabu of erstwhile Jammu & Kashmir, Dr Isaac and Dr Amit Mitra of Bengal.

At this point, it has to be noted that the Modi Government and the Finance Ministry also played extremely fair in allocating resources to all States, first by implementing fully the recommendations of the 14th Finance Commission for 42 per cent transfer of resources to States against the previous 32 per cent, accepting demands for additional borrowings of 2 per cent of State Domestic Product during Covid-19 and even a hike in the Ways and Means limit by 46 per cent as per the advices of an RBI panel which continues to this day.

One is aware of the criticism that Kerala is resultantly over leveraged. But if that is a valid concern, it holds true for Governments in general in these pandemic times. I would argue that “fundamentalist” views on fiscal prudence do not hold water at least at the present juncture.

The third palpable fallout of Dr Isaac’s policies hark back to his tenure at the State Planning Board in the late 90s when he piloted People’s Planning at the grassroots and pitched hard for the Kudumbashree movement. It has grown to become one of the largest women’s collectives in India bringing about meaningful programmes for livelihood through micro-credit from banks in Kerala. There are about 30 lakh women who are members of the Kudumbashree movement. (Politically, they are financial agents of 30 lakh families, who mostly go out and vote)

All of them have seen how money in their hands can be a potent tool for economic and social empowerment. Add to this the State’s liberal welfarism (read again, happy women) funded by a large purse, courtesy the State’s FM and a successful packaging of even Central assistance at the last mile as largesse from the local Establishment and you will find economics becoming politics at Ground Zero. The results on May 2 could well be a measure of how much such economics has trumped politics in a State where the vote shares of the two fronts are evenly matched and the BJP is a loner with a large state-wide following.

(S Adikesavan is a top bank executive. Views are personal.)

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