Kerala Budget 2021: The return of the welfare state

Thomas Isaac's Kerala budget 2021
Tax revenues are projected to rise in the next fiscal, an unlikely scenario considering the overall slowdown in economic activity.

By P Vinod Kumar

The Kerala Budget 2021 presented by finance minister Thomas Isaac reads like the wish list of a welfare economist. Not that the finance minister had other options — Thomas Isaac’s eighth budget comes at a time when the state’s economy is in deep trouble because of the Covid-19 pandemic and the subsequent global economic crisis. The FM also had to address the election year compulsions as the state will go to polls in a couple of months. Kerala’s economy is closely integrated into the global economy through expat workers all over the world. Over the years, it has developed a dependance on remittances from across the world, especially from West Asian countries.

The Kerala Budget 2021 is replete with prescriptions from welfare economics that would have made the likes of Nobel winning economist Amartya Sen proud. It marks the beginning of the return of the welfare state Kerala had been in 1950s and 1960s.

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Weathering the economic crisis

No one can fault Thomas Isaac for putting a bevy of welfare schemes and income supporting measures. He has run the right thing in the current situation. While Kerala’s robust healthcare system succeeded in preventing major losses in terms of human lives, a large number of Keralites have lost their livelihoods. Tourism sector that contributes around 15% of the state gross domestic product has crashed during the pandemic resulting in a large number of job losses. Adding to the woes, a large number of Malayalees have returned from West Asian nations and other Indian states after losing their jobs, triggering a crisis of unprecedented proportions.

Top on the list of the welfare schemes announced by the finance minister is the decision to increase welfare pension to Rs 1,600 from Rs 1,500 effective April. Anyone who understands the current crisis will agree with Isaac that it will help more than 40 lakh people to meet their monthly medical bills and other healthcare expenses. Kerala has an ageing population that needs state support in these trying times.

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Budget 2021: Support for agriculture

Increase in the minimum procurement price of agriculture produces such as rubber and paddy is another notable decision. Agriculture is the sole source of income for a large number of people in the state. As the land holdings in Kerala are small compared to other states, the farmers will need support from the government. Rubber cultivators have been in deep trouble ever since the prices of the commodity started crashing due a host of reasons, forcing many of them to shift to other crops. Paddy cultivators in the state are also in distress because of the high cost of labour that pushes the cost of cultivation to unviable levels.

At a time when governments across the world are struggling to rein in the Big Tech, the Kerala Budget 2021 has done well by not allowing the monopolies a free run in the state’s internet highway. The government has also decided to provide laptops to poor families at half the market price. This will allow a large number of lower middle-class people in the state to work from home, which is the new normal in the state as it is elsewhere in the world.

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Freebies galore

By raising the pension for expats who lost jobs to Rs 3,500 and to Rs 3,000 for those returned from other states, the finance minister has provided a lifeline to a large number of citizens. The Kerala Budget 2021 has also earmarked funds for the extension of the distribution of free provision kits to all PDS customers for another four months. This would go a long way in helping the people of the state who lost their jobs and incomes due to the pandemic and the economic crisis.

All these welfare policies mean that Isaac has managed to tick all the right boxes in his election year budget. The Left Democratic Front government will seek another term on the back of the welfare measures taken during the crisis.

Some of the proposals in the Kerala budget 2021 smack of election year public relations agenda. For instance, his promise to create eight lakh jobs in the coming fiscal and another five lakh in agriculture as well as non-agricultural sector is obviously hard to keep since the economy is going through the worst crisis since independence.

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Kerala budget 2021: Election year PR in plenty

Another area of concern is the revenue estimates that look unrealistic to say the least. Tax revenues are projected to rise in the next fiscal, an unlikely scenario considering the overall slowdown in economic activity. The increase in state’s GST share forecast by the budget also is unrealistic in the near term as the collections remains tepid. This means the government will find it difficult to raise money for all the welfare schemes announced in Kerala budget 2021.

The finance minister has played his cards deftly in the election year. For deficit vigilantes, many of the budget proposals may sound populist. Then, neo-liberal policies hardly win popular votes anywhere in the world.

(P Vinod Kumar is a policy analyst based in Kochi. The views are personal.)