“Our biggest problem is that we do not get our due share from the Centre,” Kerala’s Finance Minister, Dr. T. M. Thomas Isaac, said while addressing a seminar on the State’s development a few months ago. To prove the point he pointed out that while the tenth Finance Commission allotted the State 3.4% of the Central tax revenues the eleventh Finance Commission had reduced it to 2.54%. Considering that the State’s population had fallen from 3.36% of the country’s population to 31.1% and that the State is way ahead of the other States in many spheres, there is no need to see this cut as a grave injustice. The Finance Minister’s unhappiness stems from the realization that the State would have received Rs.20 billion more if the old rate was retained. Since the State could not spend the money received from the Centre for several projects there is really no need to nurture any great sense of loss on this account.
Our real problem is not that we are not getting our due share from the Centre. Nor is it that we are not able to make use of the money we get from the Centre. The real problem is that we do not have mechanisms to utilize properly the large sums of money flowing into the State. As with water, so with money, it is the lot of this land to suffer shortages amidst plenty. If we use our resources wisely we can manage without depending upon anyone’s kindness.
We are still led by the mindset that we developed in the past when Kerala was indeed poor. The only option before us then was to depend upon the Centre for everything. As remittances from expatriates started pouring in, the situation started changing. In 1978 I had made an attempt to find out how much money was coming in from the Malayalees in the Gulf States. The State government had no information on the subject. Based on information provided by majors, I estimated that about Rs.3 billion was received that year. Thanks to studies conducted with the help of the World Bank, we now know that during the past 30 years the inflow steadily rose to reach Rs.245.25 billion in 2007. According to figures provided by the Finance Minister in the Budget presented this year, the State’s revenue receipts last year was about Rs.214.87 billion. From this we can gather that the immigrants’ families scattered across the State together receive more than what the government gets.
In recent years, living costs have gone up in the Gulf States. But remittances from there have not fallen. Migration to the Gulf region recorded an increase of only five per cent during 2003 and 2007 but remittances from there rose by about 20% during that period. From this we cannot conclude that every expatriate is sending more money than before now. An increase of this kind can happen even if a small number of persons with very high incomes send more money. In the early stages, Gulf migration helped reduce inequality. Studies suggest that it is now increasing inequality.
Hundreds of billions of rupees flowed into the State in the last three decades. If at least a part of this money was used well, Kerala would have been in much better shape today. The emphasis is on “well”. The earliest migrants spent huge amounts to build palatial buildings. Lately there has been a fall in expenditure of that kind. According to the latest statistics, only 11% of expatriate families spend money to buy or build houses. But even now their money is not reaching activities that will yield benefit to the wider society. Less than two per cent ventured into businesses using remittances from abroad.
Many emigrate spending huge sums to get jobs and visas. Half the expatriate families use remittances to liquidate debts incurred in the process. About 84% families depend upon remittances for day-to-day expenses and about 64% for the education of children. These figures do not tell the whole story. Even after meeting all this expenditure, there is money left. That is why bank deposits have been growing continuously. Even now they are growing, but there has been a fall in the rate of growth. Taking this as a warning signal, Kerala must consider how it can build mechanisms that can fruitfully use the money that flows in. This is not something the government can do on its own. That is why I have written ‘Kerala must consider’, and not ‘the government must consider’.
Basically we need mechanisms built on professional foundations. Our political parties are particular that everything must be under their patronage or control. All existing mechanisms in the State have been built on that basis. The white elephants of the public sector are the best examples. The vast majority of the people are willing to remain happily in the shade provided by political patrons. This is not a situation conducive to building of mechanisms with sound professional bases. Yet a few such institutions have come up. They teach us that professional institutions which are not under political or bureaucratic control can earn people’s trust. The leaders who are engaged in ideological shadow fighting must study their working objectively. It may help them to find a way to strike out a new path with the help of good professionals.
Based on column "Nerkkazhcha" appearing in Kerala Kaumudi dated April 17, 2008