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Challenges in the Midst of the COVID-19 Pandemic

Pinarayi Vijayan (chiefminister@kerala.gov.in) is the chief minister of Kerala.

The COVID-19 pandemic has necessitated a rethinking of the contours of state intervention, especially in social sectors like health. The argument for rolling back the state has become questionable even among mainstream commentators. Kerala’s experience shows how public investment in healthcare and a participatory mode of governance with empowered local governments can help in pandemic mitigation. A truly federal set-up with shared responsibilities between the centre and states is better suited to deal with situations like the present one rather than a centralised system.

The COVID-19 pandemic has created a great divide in history. The glo­bal capitalist system has been thoroughly shaken by the pandemic. This is not the first time in its history that capitalism has faced such a crisis. The Great Depression of the 1930s was a classic demonstration of the systemic crisis-proneness of capitalism and the consequences of the domination of speculative finance capital over production. To save the capitalist system from coll­apse, the Keynesian concept of comprehensive socialisation of investment was sought to be undertaken in the developed world. Nation states intervened with massive public investment, raised levels of employment and evaded the ­recession. After World War II, Keynesian ­demand management and the provision of a host of welfare measures—by the state—were central to the economic ­policies in the developed world. Government spending in the social sectors rose and taxation became more progressive. Such a conjuncture was highly favourable to growth and employment generation. This period was also marked by a shift in the balance of class forces in ­favour of the working class, which wrested major concessions from the ­ruling class by making use of their stronger bargaining position.

In India, however, the post-war chall­enges as a newly independent nation were more fundamental. It needed, at the least, land reform, major public ­investments in infrastructure, education and health as well as the institution of a comprehensive social security system. Unfortunately, the political nature of ruling classes in India ensured that these measures were stymied. This is where states like Kerala stood apart and succeeded. Land reforms in Kerala weakened upper-caste landlordism in a way no other state could. The state also invested in its people by instituting a universal schooling system and a comprehensive public health system. It also set up a social security net for the poor, including providing social security pensions for informal workers.

Kerala’s successes in human development became well known to the world by the 1970s itself. Kerala held a lesson for the rest of India with regard to the centrality of land reform and the role of the state in improving public facilities. However, the reactionary ideology of neo-liberalism, that emerged globally in the 1970s, gradually took India onto a different policy trajectory. This ideology first emerged in countries like United Kingdom and the United States and was later concretised into the liberali­sation, privatisation and globalisation agenda in many countries. We know that these policies had disastrous impacts on people’s livelihoods and exposed global capitalism to new forms of crisis as in 2008.

India began a partial liberalisation of the economy in the 1980s, but it was ­after 1991 that it fully embraced the new strategy. After 1991, state intervention in the economy was challenged. Liberali­sation, privatisation and globalisation became official policies. The role of the public sector was scaled down from its commanding heights. Fiscal responsi­bility legislations and tax concessions for the rich adversely affected the ability of governments to intervene and invest in sectors like health and education. As a result, inequalities and exclusions in sectors like health and education grew rapidly. The poor were pushed out of an already debilitated public health system.1 Their healthcare costs rose. Infectious diseases like malaria, which were eradicated earlier, reappeared.

In other words, through the 1990s till now, India’s public health system was ­already crumbling due to a lack of public ­investment and political commitment to positive social change. As a result, when the pandemic hit India, its health system as a whole was vulnerable and unable to meet the new challenge.

In contrast, we in Kerala were instilling new vigour into our public health system. Over the last four years, we were able to transform our public health system through our health mission called Aardram. As part of the mission, we built new public health infrastructure, increased the number of doctors, nurses and care staff, deepened community management and improved hygiene and sanitation. Our experience is that this strategy has been hugely successful. We saw it first when Kerala warded off the Nipah virus outbreak of 2018. The moderate success, as yet, we have achi­eved in confronting COVID-19 is ­another proof of the strategy’s success.

Importance of Local Governments

In times of pandemics like COVID-19, the relationship between the state and the people needs to be strong, trustworthy and organic. This will not be possible in a centralised system of governance, wherein even minor decisions are taken at the highest tier of the government, which is the farthest from the people. Our economist friends will tell us that such a policy will be violative of the principle of subsidiarity, which states that the tier closest to the people can discharge certain functions more effectively. In our view, when you are faced with a contagious disease that could quickly ­attain the stage of community spread, the best strategy to contain it is a participatory mode of governance. The prime role in this is to be discharged by the ­local governments with community participation.

Historically, Kerala has had a very strong system of decentralised governance. The attempts to build and stren­gthen the grass-roots level democracy in the state precede the 73rd and 74th cons­titutional amendments. Legislative efforts in this regard started as early as 1957 when the state elected its first communist government led by E M S Namboo­diripad. However, the attempts to decen­tralise governance were not very successful at that time, as it met with stiff resistance from the dominant sections of the society. Further, these policies could not be taken to their logical conclusion because the left parties were in and out of office. Every right-wing government that would follow a left government would significantly dilute and undo the gains made by the previous government. As a result, whenever a left government comes to power in Kerala, its initial task is to repair the damages and rebuild the institutions. This has been a long-standing developmental problem in the state. Yet, after the constitutional amendments, Kerala made pioneering strides in the decentralised form of governance, inclu­ding implementation of the peoples’ plan programme. As a result, there is considerable community participation in the planning process, which has enri­ched the process of decentralisation of power.

It is this strong system of participatory governance that has helped Kerala in the containment measures related to the COVID-19 pandemic. Let us look at just one example. The state could effectively implement home quarantine (we prefer to call it home observation). Here, the elected members of the local governments and officials of line departments acted not merely as enforcers, but also as caregivers. Strong messages about giving due care to people in home quarantine, and not ostracising or stigmatising them, could be passed on effectively to the public at large under the leadership of local governments. A top-down model would have failed here.

Besides the leading role assigned to local governance institutions, Kerala could also utilise the services of community volunteers. These volunteers were a recent addition to the state’s participatory system of managing natural calamities. The Community Volunteer Corps formed in 2020 now has a strength of approximately 3,37,000 individuals who are physically and mentally fit to handle emergency situations. The aim is to have one volunteer per 100 population. This will work out to having a 3,43,000 strong community of volunteers. The state government is in the process of imparting professional training to these volunteers to equip them to handle natural calamities and the pandemic.

The point to be emphasised is the ­following. A state or a central government can give broad directions and guidelines, but people’s participation under the leadership of empowered local governments seems to be the most effective strategy to contain the spread of the pandemic. At the same time, a strong public sector in health and education is necessary for this decentralised model to work well. Only when all these three pillars are strong enough will the partici­patory strategy of tackling the pandemic be successful. This is the narrative which the Kerala experience places before the world at large.

New Challenges

The Kerala society and its government have received generous praise from many parts of the world. While we are happy that our narrative is getting acceptance, we do also recognise that this is not the time to rest on our laurels. We are constantly keeping a watch and ­receiving suggestions from all stakeholders. We are taking the process of consultations outside the usual scheme of governance by having a constant dialogue with persons who are settled abroad, leaders of industry and experts in the field of health and education.

Being an early starter in inclusive and universal school education, Kerala’s ­human capital is spread across the globe. The remittances our diaspora send in have been a major catalyst for consumption expenditure and economic growth in Kerala. At present, many of our countrymen working abroad are facing an unpre­cedented crisis. Almost 9% of Kerala’s population lives outside the state. The number is approximately 30 lakh. We fully recognise their desire to return to their homes. The Government of Kerala is committed to ensuring the welfare of persons who wish to return. However, circumstances have forced us to put in place certain regulatory mechanisms with the aim of containing the spread of the pandemic.

The state government has also demon­strated its commitment to assist “guest workers” from other states who have been working in Kerala in search of a livelihood. We support their emotional desire to go back to their home states and be with their families. Simultaneously, we are also taking steps to ensure jobs for those among them who want to stay back.

In the midst of the pandemic, the Government of Kerala also requested the domain experts to assess the losses to the state’s economy due to the pandemic. It has been estimated that the state’s gross domestic product (GDP) will face a downslide of approximately `1 lakh crore. Its growth rate is estimated to face a precipitous fall from around 7% to less than 2%. The worst-case scenario projections estimate the economic growth falling in the negative territory (see KSPB 2020; GIFT 2020).

This implies that the own tax revenue of the state will suffer a major decline. Experts have estimated that it will be in the range of `25,000 crore to `30,000 crore. Yet, due to the pandemic-related obligations, the expenditure, especially in the social sector, will be above the budget estimates. Cutting expenditure to meet deficit targets will have a cataclysmic impact on the economy and society. A government committed to the ­Directive Principles of the Constitution cannot do this. Hence, Kerala and other states have been consistent in demanding that the mechanical limits to borro­wing by the states will have to be rel­axed. The state was among the first to demand raising of the borrowing limit of states from 3% to 5% of the gross state domestic product (GSDP). This is a time when fiscal conservatism should be discarded. Our economic growth is in peril.

As per the latest estimates released by the National Statistics Office (NSO), the growth rate of gross value added (GVA) at basic prices for 2019–20 was 3.9% as against 6.0% for 2018–19 (Government of India 2020). The growth of manu­facturing sector fell to 0.03% during 2019–20 from 5.7% during 2018–19. The growth rate of the employment-intensive construction sector also fell from 6.1% to 1.3% between 2018–19 and 2019–20. These slowdown trends were evident even before the lockdown induced a halt to all the economic activities.

In the above circumstance, reviving growth in the economy has to be prime consideration. For this, fiscal orthodoxy has to give way to an expansionary fiscal programme. Public borrowing at this time to spend and protect the livelihoods of people and to build new infrastructure will energise the economy and expand employment. We are of the considered opinion that public spending in social sectors and generating demand in the economy through capital works have to be taken up by tapping resources in the market. We will have to focus on growth and gradually grow out of the debt. The protagonists of fiscal orthodoxy across the world seem to have realised this, at least temporarily.

Our country should not remain hesitant as we have a very large section ­(almost 90%) of the labour force in the informal sector with little or no social security. Till the economy recovers, ­incomes need to be put in their hands so that demand deficiency does not hold back economic growth. Equal care needs to be given to address supply-side bottlenecks. It is the time to work together and not in compartments. The states and ­local governments are equal partners with the centre in the structure of ­cooperative federalism. There cannot be asymmetric relations, which will result in fiscally disempowering the tiers of the government closer to the people.

In Conclusion

The outbreak of COVID-19 could not have come at a more inappropriate time. The national economy had already started showing palpable indicators of an economic slowdown. In fact, the first signs were evident as early as 2008. Particularly after 2011–12, the investment rate and the savings rate in the economy showed a downward slide. Employment fell. Official data for 2017–18 showed that our unemployment rates were the highest in the last 45 years.

The Covid-19 pandemic has emerged on top of the already brewing crisis and it has brought the economy to a grinding halt. Government revenues have dried up while spending obligations have gone up. We should not hesitate to borrow and spend in the immediate run to revive the economy. In the medium run, we should rethink our economic priorities and redefine the role of the state so that it will be empowered to effectively intervene in social sectors like health and education. Fashionable phrases such as “minimum government, maximum governance” should have no place.

The experience of the pandemic should act as a game changer in assessing the role of the state vis-à-vis the market. Public sector intervention in social and economic sectors cannot be treated as an avoidable evil. Borrowing by the state cannot always be a vice. Growth that is induced through borrowing can have positive multiplier effects. Empowered states and local governments should be equal partners with the centre in a cooperative federal set-up. Only they, together, can encourage investment and provide social security. This needs to be our way ahead.

Note

1 There are empirical evidences of growing inequalities in income and wealth (Piketty 2017; Chancel and Piketty 2017). In the Indian context, researchers have found that the degree of health inequalities escalate when the rising average income levels of the population are accompanied by rising income inequalities (Joe et al 2008). The same is the case of education unless there is intervention by the state.

References

Chancel, Lucas and Thomas Piketty (2017): “Indian Income Inequality, 1922-2014: From British Raj to Billionaire Raj?” October, CEPR Discussion Paper No DP12409, https://ssrn.com/abstract=3066021.

GIFT (2020): Economic and Fiscal Shock of Covid-19 on Kerala, Gulati Institute of Finance and Taxation, Government of Kerala, Thiruvananthapuram.

Government of India (2020): “Press Note on Provisional Estimates of Annual National Income 2019–20 and Quarterly Estimates of Gross Domestic Product for the Fourth Quarter (Q4) of 2019–20,” National Statistical Office, Ministry of Statistics and Programme Implementation, New Delhi.

Joe, William, U S Mishra and K Navaneetham (2008): “Health Inequality in India: Evidence from NFHS 3,” Economic & Political Weekly,
Vol 43, No 31, August.

KSPB (2020): Quick Assessment of the Impact of the Covid-19 Pandemic and Lockdown on Kerala’s Economy, Kerala State Planning Board, Govern­ment of Kerala, Thiruvananthapuram, http://www.spb.kerala.gov.in/images/pdf/whats_new/cov19_qck_asmt_fnl_eng....

Piketty, Thomas (2017): “Capital in the Twenty-First Century,” Translated by Arthur Goldhammer, Cambridge, Massachusetts, London: The Belknap Press of Harvard University Press.

 

Updated On : 15th Jun, 2020

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