'It is going to be a time of big social problems'

Interview with Dr Thomas Isaac, Kerala Finance Minister.

Kerala Finance Minister T.M. Thomas Isaac.

Dr Thomas Isaac, Kerala’s Finance Minister was a Professor of Economics at the Centre for Development Studies, Thiruvananthapuram. As a Member of the State Planning Board subsequently, he was a key figure in Kerala’s acclaimed People’s Plan Campaign for decentralisation of powers and resources. He had also served as the State Finance Minister during 2006-2011.

Thomas Isaac spoke to Frontline in detail about what distinguishes Kerala’s response to COVID-19 from that of the Centre and other States; the Centre’s “muddled-headed” strategies; why there cannot be a lockdown without ensuring minimum subsistence to the people; and finally, Kerala’s extreme scenario strategy and why it is going to be a time of big social problems in India when all have to work together.

Excerpts from his interview:

What did Kerala do to contain the impact of the pandemic so effectively?

I think you have to start from the strength of the public health system in Kerala. It is a long history, a legacy of the past. But the present Left government has paid much attention to strengthening the public health system. An investment of around Rs.4,000 crore has been made from KIIFB [Kerala Infrastructure Investment Fund Board] towards improving buildings and equipment, so that now every medical college has an oncology department, every district hospital has a cardiac department, and every taluk hospital has at least 20 dialysis machines, and so on. The Kerala government has also launched the Aardram mission which focuses on primary health care centres, transforming them into family health centres. These are very similar in concept to the wellness centres under the Ayushman Bharat scheme, but the similarity is only conceptual.

The top 12 primary health centres (PHCs) in the country today are in Kerala and 68 PHCs in the State have got national accreditation. There has also been a very rapid increase in the palliative network and the activities of hospital development committees. Such is the strength of the public health system, which has functioned remarkably well in the post-flood crisis and also when Kerala tried to contain the Nipah outbreak. The system has by now established protocols for dealing with crises. So the moment the news about Wuhan came, immediately a control room was opened by the Health Department, mock drills were carried out, training was given, and all preparations started in earnest. All the students who returned from Wuhan were quarantined, without a single case of spread outside. Then things went out of hand with the second influx from the Gulf and Europe, when some people dodged quarantine. But now that problem also has been successfully tackled.

There are many specific factors in Kerala’s handling of the corona virus threat that stand out in contrast to the rest of India. First, intensive cycles of testing, tracing all the contacts, then testing again, quarantining again —these cycles that we followed haves been very effective. In fact, the creation of route maps was an innovation of Kerala. For every infected person found positive, a route map of his/her activities in the previous two weeks was immediately created, and then published in newspapers and elsewhere so that everybody who was in their vicinity was alerted; and people began to be cautious. This has been very effective and this is what has been lacking in the country, because no testing is being done. You can see some of the States with a high mortality rate do not have that many COVID-19 positive patients. It indicates that many infected patients are not detected. And that is a gap that can only lead to calamity.

Secondly, I must add that the ‘“Break the Chain’” campaign launched has been very successful. Keralites have a tradition of betel- chewing, which means spitting on the road is common. That has now disappeared, because of the grass-roots spread of the campaign. The “Break the Chain” campaign has ensured that people are using sanitisers and soap at every corner. While we have not taken to wearing masks, I am sure that will also become popular in the next stage. From the medical perspective, I attribute Kerala’s success to these two key factors.

Kerala was also the first State to announce a livelihood package, in spite of the serious economic troubles it already faces. What prompted the State to do it so early in the COVID-19 crisis?

Kerala is a State that has powerful social movements which will demand it [livelihood package] if the State fails to provide it. There will be agitations. I think it is a very positive thing that there is tremendous pressure from below. It is not just the benevolence of the State government. There is such pressure from below that no government can ignore it. And the State also realises that you cannot have a lockdown without ensuring minimum subsistence to the population whose livelihoods are also shut down as a result. If we don’t do that, or pay attention to it, we now know what the result will be—the whole lot of migrant workers fleeing from the cities, undermining the very logic of this lockdown.

This is something that the government of India has to understand—that without guaranteeing the people bare minimum of necessities, it won’t be possible to insist on their compliance. Therefore, even before the Central Government announced its meagre measures, we announced our Rs. 20,000-crore package. But the State cannot raise Rs. 20,000 crore outside the Budget. We have hard budget constraints. Therefore, all that was done was, we ‘“front-loaded’” our borrowing and what we are spending. It may not be considered prudent because you don’t know what will happen later in the year, and that too in an election year. But that was not our consideration.

Now the paramount consideration is fighting the disease. Therefore you have to pay attention to the needs of the people. This is something unparalleled. We provided Rs.8,500 each to 55 lakh elderly and disadvantaged people. Almost an equal number of workers who are members of the welfare funds have been given Rs.1,000 to Rs.1,300 each and anybody who is needy and does not come under these groups has been given Rs.1,000 each. In addition we are providing additional grain from the State government funds and also a Rs.1,000-worth food kit to every family irrespective of whether they are rich or poor. That is because there is absolute food scarcity—we are a food-scarce State. It is not a measure for poverty alleviation.

And all along the State, we have started some 1,300 community kitchens that provide free meals every day to anybody. You make a call and it is delivered at your doorstep; or you can come to the counter and take the packet. So we ensure all the migrant workers are provided food at least. Even the homeless who have been sleeping or wandering in the streets are put into camps. That is how we ensure that there is nobody on the streets and everybody is provided food. And I think it is remarkable.

The return of expatriates

The return on a large scale of Keralites who are now in many COVID-19-affected countries, especially in the Gulf region, is now a distinct possibility. How prepared is the State and how big a challenge will it pose?

This is going to be Kerala’s next big challenge. One does not know how many will come back. I think the State should expect between one lakh to three lakh people. And you don’t know how many among them may be COVID-19 positive. So it is clear we have to quarantine every one of them for 21 days. We have decided that our quarantine period will be 28 days, because there are asymptomatic persons among them. So we have identified and requisitioned for disaster management in all hotels, hostels, colleges, even houses and flats lying empty in preparation…and everything is now geotagged so that we know what is happening where. Once they [the expatriates] come, two things are possible. One, we quarantine them and there is no secondary spread. Two, whatever we do, there may be secondary spread, in which case we are thinking of a strategy of reverse quarantine—all elderly and vulnerable people, who are at risk because they have other diseases, may not be allowed to move around and will have to stay indoors. Other people may be allowed to move out because lockdown will be lifted after a while. But the vulnerable sections will stay indoors. We will regularly monitor them so that those persons developing any symptoms will be moved to hospitals. We will not allow them to die of COVID-19. Younger persons may have relatively lesser risk. But all of this requires meticulous planning.

We have accessed World Health Organisation data on Kerala of more than 2.5 crore people—about two- thirds of the State’s population—and are integrating it with new information for filling the gaps. This is a huge data set which allows you to anticipate various scenarios about the prospective situation under certain circumstances, with good [degree of] accuracy. One can also plan for districts and regions on what should be done. We are now working on this big data analysis. A whole lot of IT start-ups are cooperating with the government in this.

That reminds me: the third and key difference with regard to Kerala vis-a-vis other States is “preparedness”. That is what distinguishes the State [from others]. We were always prepared. We are preparing for the worst-case scenario. When they came first, our health system was prepared. We were ready for the second wave. Preparedness is very important. And that preparedness is lacking in many States, even with regard to the Government of India. Had the government of India been prepared we would have had many more tests. But they woke up very late. Kerala is a State government, and yet the test rate here is very high. The lack of preparedness is a major weakness in India but it is different in Kerala.

Could you tell us more about the WHO data collection on Kerala you mentioned?

The WHO has data collected for its [Global] TB programme and so on. It is a huge set of data, collected over a long time. It has been storing it and graciously made this collection available to us. We might as well make use of it after ensuring protocols are in place for data security.

About the return of migrants from the Gulf, do you think a number of them will return for good?

We don’t know when they will go back. A large number of people in the Gulf are losing their jobs. So they will come back. Many are temporarily laid off. One doesn’t know when they will go back.

What kind of an impact will it have on Kerala’s economy?

It will be very big. One, the government will have to help them, and that will be a huge burden on the public exchequer. Two, it will have an adverse impact on remittances, which have a reverse multiplier effect on the regional economy. So you will find that the factors that characterised Kerala economy from the late 1980s until now, enabling it to grow faster than the national average for three decades—and that is how Kerala, a State with one of the lowest ranks in per capita income, is today set at 60 per cent above the national per capita—that scenario is going to, or is likely to, change.

There is also the issue of inter-State migrants, who want to go home.

They want to leave because they don’t have jobs under the lockdown and there is no income. But you cannot walk all the way to Bengal from this corner of India. So while we cannot send them home, we are trying to provide humane conditions of living, food, and so on. And we need them here in Kerala—as long as Keralites are going out to work in Europe and the Gulf, you need a lot of other workers to come. It is not like they are parasitic or something. The Kerala government does not think so. They play a very useful role in Kerala.

Do you think they will come back in such large numbers?

They will come back. As long as Kerala’s wage rates remain what they are today, they will come back.

But a large number of Keralite workers and labourers in the rest of India are returning to their home State at the same time. Will that not make a difference?

The reserve price of people who come back from the Gulf is going to be high at least for some time. They won’t work below certain wages. And that standard is set with reference to their earnings in the Gulf—not fully, but with some relation to that, except in the case of women. The female workforce is available, but males… it is a very different wage system for the males. And therefore, these inter-State migrants will have to come back. But I think, not to the scale… for if construction activity in Kerala takes a dip, there may not be that kind of demand either. But that is temporary. They will be coming back.

The Centre’s attitude

These are early days and thus far , the State has been able to cushion the impact of the COVID-19 and lockdown on the vulnerable sections through cash transfers, provision of essentials, and so on. H ow long will Kerala be able to sustain such support?

The government of India will have to provide it. They cannot be silent spectators. All States, whether they are ruled by BJP or the Congress, they are all saying that there is no money in the States. There is zero income. Therefore, the Central Government will have to respond. After a while, there will be serious fiscal crisis. See, what we are going to have is a long slump, and India is not going to get out of it. The world is not going to get out of it. And without the cooperation of the Centre, the States we will not be able to address this slump. It is not like the Centre transfers a whole lot of money and the economy will pick up. That is not going to happen. That is for relief only. You have supply chains broken. An agenda has to be drawn up, by the Centre and the States together and the Centre will have to raise the deficit ceiling of the State, at least to four or five; pay all the GST arrears that are due to the States, and also pump in money into the health system. That they will have to do and I am certain they will be forced to do it.

Why do you think the Central government is reluctant to do it, if it seems to be such an obvious thing to do?

It is simply ideological. There are some people who are still lost in the old neoliberal paradigm and who think that any increase in fiscal deficit will lead to inflation, higher interest rate and so on, which does not apply here at all. So it is simply lack of clear thinking. It is muddled- headed thinking. Look at the world. The world is changing. The Indian government also will have to change somehow with it.

And you have been complaining that while governments now need to spend more, the Centre is forcing the States to cut expenditure.

That is what they have been doing. They have not been giving [funds]; if you add the month of March, the Central Government owes to the States GST arrears alone of around Rs.50,000 crore. Come April, it will be even more because there will be no GST income at all and they won’t pay. The Centre’s fiscal deficit has gone above four. But it won’t allow the States to borrow more. So most State governments have chosen the easy path of cutting expenditure. Many development schemes are being given up. Five States have deferred the payment of salaries. This is absolutely crazy: while the Central government is expanding the expenditure, it is forcing the State governments to cut expenditure. It does not make any macro-economic sense. The States and the Centre should together have a programme for stimulating the economy.

What is the purpose of the seminar of State Finance Ministers that Kerala is planning to organise?

We are organising a webinar on April 27 and 28, because the Central government is not paying attention to what is being said. So I have requested all State Finance Ministers to come together on a webinar platform. There are no decisions to be made but to exchange views. I don’t know how many will participate because definitely they will have political considerations. But I don’t see any reason for 10 or 12 Ministers not to come. We are also calling academics, experts, financial bureaucrats, even journalists. It will be telecast live so that everybody can log in and see. I hope it will help bring the issues involved to a national level discussion.

Do you think other States are in agreement with you and have the same grievance?

In private, everybody agrees. In public, many Bharatiya Janata Party-ruled States do not want to join in a forum which they think will have anti-Centre overtones, even though they have the freedom to say what they feel like. But that has not happened in the past, whenever Kerala has made an initiative. Then there are non-BJP States who think they don’t want to annoy the Centre. But I hope the Congress-ruled States, Delhi, and hopefully Andhra, Telangana and Orissa will join.

Test kits

It is well understood that widespread testing is the key to controlling the spread of COVID-19 in any society. Compared to other States, Kerala has conducted a higher number of tests. But isn’t the number of tests done still too small? Do you think it is enough to conclude that the State has everything under control?

No. Now we have hit the barrier, for lack of testing. We don’t manufacture test kits. And [United States President Donald] Trump is cornering all those test kits that China or Korea can make. Already we hear some States in India, for instance Tamil Nadu and Delhi, complaining that the U.S. has taken away the test kits that they had bought. Tests have become very scarce in the world now. That is a major problem for us.

But India is an important economic power. We should go on a war footing. It is not such an insurmountable technological challenge. The Indian biomedical industry should be given money and helped to expand to produce the test kits that we require. In fact, developing the Indian pharmaceutical industry, both public and private, can be a major element of India’s exit strategy from the lockdown. If we do it fast, like China has attempted to, we can have a market.

Are States buying test kits on their own now, and from where?

[They are buying] from China, South Korea. Now the government of India has said States cannot source it directly and that we have to go through the Centre. So we are totally at the mercy of the Central government. I think the States should be given this freedom. Let the Centre acquire it, by all means. It is not a situation where anybody will say you have acquired too many ventilators or too much medicine. There is therefore no reason why the Centre should monopolise and create bureaucratic hurdles. So let that process go on and let any State that can procure more do it, too.

Kerala is a consumer State and has faced severe food shortages in the past. Do you think the State will be facing a shortage of essential supplies in the long term?

Yes. Because it is a consumer State, even in the short-term we are going to face serious problems. All the goods traffic has been disrupted. When the lockdown continues, shelves go empty, and many things will become scarce. Even food has to be sourced from outside. But we are stocking food supplies as much as possible. But then it also provides an opportunity for Kerala to become self-reliant in some ways. So we have started this campaign, “Grow Your Own Vegetables”, during the lockdown, when people are at home—who knows, you may even get the paradoxical result of people of Kerala returning to farming again after the lockdown.

The COVID-19 crisis has led to job losses on an unprecedented scale all over the world. What will be the impact on jobs in Kerala?

It is going to be the greatest slump in history. It is already there. This quarter, all advanced economic countries, including China and the U.S., have registered negative growth. So this year, if COVID-19 is controlled in two or three months, it will be minus four, five or six percentage growth. But if the pandemic continues, then we have a huge problem. Huge. An economic disaster from which it will take the economy a long time to recover.

And the impact in Kerala?

In Kerala, it is definitely going to be negative growth. Our GDP is about Rs . 7.5 lakh crore. We may lose half of that.

Which sections are going to be impacted more?

The biggest impact will be on tourism and service sectors, which depend on outside factors. Then all export industries will be in doldrums because the market is gone. We are producing a lot of intermediate goods, chemicals and so on, whose demand is gone. So, one doesn’t know. The all-India demand of commercial crops is going to go down and import from outside will increase once the lockdown ends, because prices are trash in the international market. Kerala is going to face a big problem. It is going to be a tough time for the unorganised sector also.

One cannot imagine or map what exactly would be the scenario unless you have sense of how long this situation will continue. If it is prolonged, that is a situation you cannot imagine or plan for. But we will have to provide the bare minimum for everybody, get people to understand what is happening. It is going to be a time of big social problems where everybody has to be together. This has not happened in our lifetime, so one doesn’t really know. In happened in the beginning of the 20th century and in the medieval ages. What will happen when a pandemic occurs in a globalised world? We don’t know. It is going to take a long time for it to come out, and Kerala or India wouldn’t be alone.

What are your immediate priorities when, as you said, you are going to “strike a balance between containing COVID-19 and enabling the economy to function”?

Now the focus is on containment alone. To stamp it out. We are already on that path. And then we have an exit strategy. That is being done. But we will keep our eyes upon what is going to happen when the next wave of return migrants arrives in Kerala. It is a very fluid situation in the State. So we will have contingency plans for each scenario. And that is what is required. We cannot plan for one situation alone. Suppose it is prolonged, how do you open the economy? You cannot close it down permanently. Therefore, then we can do nothing else but introduce reverse quarantine. Quarantine and protect the elders and the vulnerable people and allow others to go out and work. But that is an extreme scenario. There are other variants of it. We have to look at these options carefully.