Kerala Finance Minister believes in just one economic stimulus ⁠— vaccines

Kerala Finance Minister believes in just one economic stimulus ⁠— vaccines
  • K N Balagopal thinks giving emphasis on healthcare is the best way to revive the state’s economy.
  • In the state budget, it was announced that a ₹100 crore venture capital fund was set up to help startups and small and medium scale businesses.
  • The finance minister also says that under the GST regime, states are not getting ‘enough freedom’.
A lot of states have been releasing their own stimulus packages to compensate for the strict lockdowns. Kerala, however, was the first to announce a relief package even before the central government did, in March last year. After the pandemic’s second wave, though, the newly elected state has decided to focus more on vaccinations than economic stimulus.

They are vaccinating district by district, and in the meanwhile releasing ration kits to help the poor to tide over the bad times. Kerala ranked 11th among all Indian states for its vaccination rate, as of June 28 .

The finance minister of the state, K N Balagopal, discussed the troubles of small businesses and their policies with Sriram Iyer, as part of Business Insider’s MSME Exchange, a virtual event dedicated to small businesses in the country. Edited excerpts:

You released a relief package of ₹20,000 crore in your latest budget. While a few hail it as a countercyclical measure, was it the intent?

The second COVID wave is much more serious than expected. There are reports that there is a chance for a third wave where new areas like pediatrics need to be strengthened. So, we thought that our emphasis should be mainly on health where we gave maximum emphasis and allotted ₹2800 crores in the budget itself.

This was for universal vaccination, and more facilities to the hospitals and especially pediatrics. This is an infectious disease, which requires a lot of infrastructure. So, we planned to combat and have the COVID situation covered.

Then, our people will be safe enough to work. Our industry will work. Our service sector will work. Our agriculture industry and also our major area of activity ⁠— tourism where people feel safe to go to.

In our plan, first comes health, and second is on agriculture and industry which includes MSMEs [micro, small and medium enterprises]. We are also providing food kits to all families. We have also cleared pending bills for contracts, which were lagging behind for six months or even a year. All this money will go to people. Those who do not receive pensions will also be paid.

So your plan is to declare a few districts as Covid-free. And that everybody is vaccinated, so tourists start coming in and, therefore, everything else like hotels, transport and small enterprises start moving.

Not just the tourists, though they are very important. We have around 33 million people working outside and now 1.4 million are back here.

It’s a very tricky point for you. Putting the million plus people returning from the Gulf countries to work. Kerala has many things to be proud of like primary healthcare, education and tourism, but its manufacturing industry is not its greatest strength. How are you going to employ these people?

We have a programme to help industry and agriculture. We are announcing some schemes like MSMEs with loans [sic] with lower interest rates.

Have you announced these, or are you going to announce?

We already announced them.

Is it the Chief Minister's entrepreneurship scheme?

Not just that. We are providing ₹10,000 crores [of] subsidised loan. We are planning to provide ₹2,000 crores to agricultural cooperatives like societies, which can do agriculture related industry or set up such units.

Are small businesses even taking loans? They seem to be worried about demand, and are choosing to be cautious.

It is a serious issue. That is why I said if your economy is not active, you cannot do anything with this. If our industries are producing something and nobody is there for purchasing, so there is no need. Then it's a very long discussion on how to create demand. What we are doing with [the] stimulus package is to ensure that people get money via loan schemes.

Many people might want some loan, if an interest subsidy is there. If industry is working, and there is some money coming in, the demand will come. I would add that it is not a fast process.

How will the state be able to finance these schemes? Especially, since remittances are going to take a hit with the return of people who were working in the Gulf countries and sending money back to Kerala.

It is not [only] Kerala, but other governments are also facing this problem. The central government has everything with it [sic], be it GST [goods and services tax] or taxes or petroleum cess - it’s all with them. The central government has to make a very serious plan to help the states. And not just the states, but their subjects, common people, the industrialists. There should be some plan. Otherwise, the economy will not be revived.

In your recent statements about I know you have a lot of anger, a lot like a lot of other state governments because they're not getting their share. They have to wait and all of that. But do you really believe that the sum total of GST’s impact on the economy has been really that bad that it should be repealed? Even the harshest critics of the Modi government would say that the idea is good, but implementation was lacking.

And do you really think that India can sustain another shock of going through a complete overhaul of the tax regime one more time in just three years?

No, no, that’s not what I said. The experience of GST in the country shows that it is not implemented properly. We gave a dissent note on behalf of the Left. These issues mainly raise the question of federalism.

And now, state governments are not getting enough freedom. But there's a thinking among the people who supported GST earlier, who supported GST earlier that it's very detrimental to the interest of the state governments. And, if this feeling grows, it will not help the unity of the country.

I had written this in the dissent note that the control will be with the central government.