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One year of the LDF Government

Prabhat Patnaik

There is a chorus these days: “development is above politics.” This means that no matter what government comes, the same development policies must be pursued, which, needless to say, are the neo-liberal policies. So complete has this process of “destruction of politics” been, that most State governments, irrespective of their political colour, are pursuing the same set of economic policies, focussed essentially on the creation of an “appropriate climate” for private investment. They even vie with one another in providing “social bribes” to private capital in order to entice it to locate its investment in their particular States.

Of course, when the national government is pursuing neo-liberal policies, the scope for State governments to do something different is limited. But they do have options. It is by no means inevitable that the people’s verdict, rejecting neo-liberal policies in every election, should be perpetually flouted. The one year’s rule of the Left Democratic Front Government in Kerala (it came to power on May 18, 2006) is a resounding demonstration of this fact.

There are at least three areas where its approach has been completely different from the conventional one that enjoys the blessings of neo-liberalism. One relates to the agrarian crisis. The conventional approach to this question has been to announce some relief to the peasants in the matter of interest payments on institutional loans, and to focus on raising agricultural productivity. To this latter end, corporate farming, contract farming, a reversal of tenancy reforms to make these possible, and the induction of MNCs and corporate interests into agricultural marketing, are all suggested as means of improving the conditions of the agriculture-dependent population. Measures leading to the eviction and displacement of peasants, with no employment opportunities coming up outside of agriculture, are passed off as their means of salvation. By contrast the LDF Government’s approach has been to defend, protect, and nurture peasant production.

Two of its measures deserve notice here. One is the setting up of the Agriculturists’ Debt Relief Commission, which, apart from negotiating with institutional credit agencies for debt relief to peasants, will also arbitrate on a case-by-case basis on the debt owed to private moneylenders, and will, in the case of destitute peasants, recommend the takeover of debt by the State government. The setting up of this Commission is an unprecedented step in post-independence India. Something akin to it had occurred only before independence when the provincial governments of Punjab under Chhotu Ram and of Bengal under Fazlul Haq had set up similar arrangements.

The second measure is the offer of an assured price of Rs.8.50 per kg of paddy. This has reversed for the first time the secular decline in area under paddy cultivation in the State. And the expected increase in rice output in the current year is 30 per cent over the previous year. The government, of course, can do little to protect prices of cash crops, where tariff and trade policy enter strongly into price determination, but its support to paddy cultivation has provided some relief to peasants.

The second area where the State government has adopted a different approach relates to its autonomy vis-À-vis the private sector. Instead of gratefully accepting whatever conditions are laid down by capitalists for setting up projects in the State, the government has asserted its autonomy by fixing a suitably high “reservation price” below which it would not go in all such negotiations. The Smart City deal is a case in point. The previous government had already negotiated an agreement with the Dubai-based TECOM group to set up Smart City but the LDF renegotiated the deal on terms more favourable to the State, including 26 per cent equity in the company developing the project. This deal may set a healthy precedent whereby the State government insists on 26 per cent equity, which gives it veto power, in all future deals of this sort.

The demolitions of unauthorised structures built on government land encroached upon for the purpose are another example of this autonomy. Since these structures belonged to major capitalist interests among others, the “natural” reaction of a State government, influenced by neo-liberalism into an obsession with sending the “right signals” to capitalists, would have been to take a soft approach towards such encroachments. The LDF’s toughness, which has brought it great popularity among the people, represents a sharp contrast to this. This toughness does not per se signify hostility to private investment. It only means that capitalists have to operate within a certain discipline, and on terms that do not violate what the State government considers a minimum acceptable set.

The third area of departure relates to fiscal policy. Kerala has been having a fiscal crisis since the beginning of this century. But it has responded not by raising additional tax revenue, which it could easily have done since the State has been having a growth rate of at least 8 per cent of late; instead it has curtailed government expenditure. And since certain elements of government expenditure are inflexible downwards, such as interest payments, salaries and pensions, the axe has inevitably fallen on public investment and welfare expenditure. The much-vaunted “Kerala Model” is consequently a shambles, with the public health and education systems suffering great degradation in quality, and people having to access private facilities at considerably greater costs.

The previous United Democratic Front Government’s approach to the fiscal crisis was quintessentially neo-liberal. Far from raising the tax-GSDP ratio the UDF kept it virtually constant for five years, during which the tax-GSDP ratio of every other South Indian State was increasing impressively. In 2002-03 Kerala had the highest tax-GSDP ratio among all the South Indian States; but by 2006-07 it had the lowest. While eschewing additional resource mobilisation, the UDF Government, quite gratuitously, passed a Fiscal Responsibility Act aiming to restrict the size of the fiscal deficit to a mere two per cent, which was even lower than the subsequent Central legislation’s target of three per cent.

The LDF government, by contrast, has gone in for substantial additional resource mobilisation in the 2007-08 budget, and for significantly stepped up public expenditure. The Eleventh Five Year Plan for the State has launched a set of flagship programmes, which include the provision of free healthcare to the bottom 30 per cent of the population (and affordable healthcare to the rest); an ambitious scheme of scholarships/fellowships at the secondary, higher secondary, college, and research levels; the recruitment of an additional 100 faculty members at the university/college level where the various departments are woefully under-staffed owing to past expenditure cuts; the provision of free mid-day meals to all school children (including of plus two classes) opting for it; free housing (including renovation of existing dwellings) for the entire below-the-poverty-line population; and the spread of awareness against gender discrimination, which is a major concern in Kerala.

In short, expenditure, instead of adjusting to resources, which are deliberately kept meagre in deference to the neo-liberal paradigm, is now being sought to be stepped up in response to requirements and the necessary resources obtained through additional taxation and borrowing.

The above are not just a set of empirical adjustments in specific policies. They are interlinked and constitute an alternative trajectory. For instance, since a peasant’s economy is a total one, where there is no separation between the spheres of production and consumption, the decline of the public healthcare and education facilities has been a major factor contributing to the agrarian crisis; the stepping up of public expenditure in these spheres therefore is simultaneously a way of protecting peasant agriculture. Likewise as the State government garners larger fiscal resources for itself, its autonomy vis-À-vis private capital, its ability to enforce a “reservation price,” also get strengthened.

There are several other components of this trajectory, such as a successful turning around of loss-making public sector units, a serious effort at implementing the NREGS, which started late in the State but has picked up impressively (at least in Wayanad, the poorest district), and a revamping of the Public Distribution System which, like everywhere else in the country, had got severely eroded. One important component, the Education Bill, which is the first attempt anywhere in the country at a social regulation of private educational institutions, has got stalled in the law courts; but the drive started by the bill will certainly have salutary consequences.

To say all this is neither to underestimate the enormity of the task that remains, nor to express complacency over what has been achieved. The plethora of powerful forces hostile to an alternative trajectory has not disappeared. The pitfall of going in for “prestige projects” and hence dropping perforce its own pro-people agenda is ever-present before the government. It needs to remain vigilant, but it can look back with some satisfaction at what has been achieved during its first year. This shows that an alternative, however modest its departure from the conventional may initially be, is possible, provided politics, in the sense of class politics, is put in command.

(The writer, Professor at Jawaharlal Nehru University’s Centre of Economic Studies and Planning, is Vice-Chairman of the Kerala State Planning Board.)

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