 Kerala is number one, never is social sector achievement in the country. Now that is an embarrassment for the Modi model. Central government very deliberately and planned to may subtle the financial state government, put it into crisis. It has stated in this review of the central government finances that Nirmala Sridharaman have understated of budget borrowing. Today's this budget, central government's fiscal deficit is 511 percent. All the state government together it will be 2.8 percent. Aren't they ashamed? Why don't they accept the dignity of the people? Kerala is first resisting that, leading that resistance. Hello and welcome to NewsClick. On February 8th, the Chief Minister of Kerala, the cabinet ministers and the elected representatives of the assembly and parliament will sit in protest in Jantar Mantar against the issues of the state with regards to the financial assistance from the union government. To discuss more about this, we have with us Dr. T.M. Thomas Isaac former finance minister of Kerala. Welcome sir. So to begin with the government of Kerala is going to hold a protest on February 8th. The first such protest by state government against the center. So what are the major reasons for this protest regarding the financial demands of the state? We have been pleading with the central government and trying to talk reason with them, but they are muted. They imposed an undeclared blockade, a chronic blockade on Kerala government. So the campaign started more than a month back. The cabinet, entire cabinet led by the Chief Minister, held meetings in every constituency in Kerala over a month and a half period. And it was attended by a large number of people, about 24 lakh personal attendants and the total participation would be more than one crore. So huge massive exercise. Then the next stage was 550 kilometer long human chain led by D.Y.F.I. It was very successful, not to know why. Media could point out a place where there was a break in the chain. Now in the third stage, the cabinet and MLAs and political leaders they are offering Tharna in Delhi. So national attention comes to this serious situation in the state. We have also invited other national leaders and chief ministers. On the same day, in every panchayat in Kerala, from every booth, small processions will go and converge at a central place and there would be public meetings all over Kerala. So we are going to confront the central government. Central government has decided to strangle economically the state government because Kerala is something which is an iso for BJP. Kerala is number one. Never is social sector achievement in the country. This is accepted by everybody. Nobody can dispute that. Gujarat, that is Modi's model. And Kerala, they have similar per capita income. But say, the agricultural leverage in Gujarat is just 280 rupees while in Kerala it is 880 rupees. Oh, Kerala is completely illiterate. So the poverty, below poverty, 22% population in Gujarat, almost zero in Kerala. So we have done very well in distribution that assure every citizen basic minimum needs. That's what Kerala has achieved. Now that is an embarrassment for the Modi model. But now we are doing something which they think we cannot. Every, the reaction is argue the left is very good in redistribution. They can, they are very efficient in say redistributing the cake. But they don't know how to bake the cake. And now Kerala needs to bake new cakes. And this the left don't know. So therefore we have embarked upon a new path of development. We have tweaked a development paradigm. While keeping our welfare gains of the past, we want to overcome our infrastructure deficit at the earliest. And then on the strength, the move on to a knowledge economy, transform the technological base of our economy so that is high productivity economy and quality jobs are produced. Now if you are able to achieve that, then that would mean a major embarrassment for all these neoliberals. So the central government is out to scuttle this to enterprise. A century back Kerala made terms with destiny. We said we are going to focus on social sectors. While colonial conditions, okay, it started before national independence. But still we stuck a different path. Now we want to change our path, development path so that we overcome our infrastructure deficit and we create quality jobs within Kerala. They cannot let it happen. So the economic blockade against Kerala. Sir, the ministers and yourself have put a lot of facts and figures about the budget deficit, which Kerala is facing. On different heads, including the reduction in the 15 finance commission recommendations, end of the GST compensation, the amount is about 57,000 crores. So why this has happened and why do you want this kind of things to be given to Kerala so that, as you said, the developments can continue. Kerala is facing very serious financial crisis. I mean, Kerala governments, Kerala economy is still doing pretty good. Our per capita income is less than 6.06 percent last year. National average is only 5.89. So economy is doing pretty good still, but the government is in serious financial trouble. Why does it happen? It can happen for two reasons. One, you have overspent on the Fuyudohomani. Or you are a cease of shrunk on the Fuyudohomani. Now, if you compare 2022 to 2023, you will find that our expenditure of the government has shrunk from 1.57 lakh crores to 1.53 lakh crores. Therefore, it is not a question of spend thrift government and so on. They have been very judicious. Any government normally should expenditure should go by 10 percent. We have consciously adopted, say, controlling the expenditure. So the crisis is not because of expenditure side. The crisis is because the receipts have gone down. And the receipts consist of three types, three sources. One is the own revenue of the state government. That in Kerala is very important. While other states receive something like average 65 percent of the revenues from central transfers, Kerala share is something like 28 percent, 22 percent. Very, very lowest in the country. Now, if you take that there is own revenue. Two, the central transfers from center. Three, the loans permitted by the central government, capital receipts of the state government. These are the three sources of revenue. So if you take the own revenue of the state government, it has increased by 23 percent between 2022 and 2023. This is a record increase for any state in India, 23 percent increase. So the crisis is known because receipts or own receipts of government has come down. It is very crystal clear. It is because central government aid and loans have been cut. What more proof do you require? So between these two, what has happened is that one 14, 15 finance commission gave a road deal. Our share in the overall devolution is only 1.8 percent while we account for nearly 3 percent of the population. Two, we made a lot of noise about this. And the finance commission gave all such states which were affected by change in the population, e-base here and so on, revenue deficit grant. Nankala was a big beneficiary of that. We received revenue deficit grant and 22-23 revenue deficit grant ceased. On top of that, GST compensation ceased in 22-23 because the implementation of the GST has been very poor by, in fact, the havers out by central government. Only in the fifth year, the whole system was in position. And before normalcy was gained, GST compensation came to end. Central government refused to extend it, though it didn't pay cost anything to central government because this is based upon a special sauce, not from central government's kitty, but in a vengeful mood. The person finance minister said, no, we will not extend it. So GST compensation also came down, ceased in that year. So the state would have been a serious fiscal stress. But our own revenue grew well. Now central government chose this moment to strike. Do you know what they did? They just halved the borrowing of the state government. In 22 Kela borrowed 43,000 crores, CAG audited number. And 23 Kela's permitted only 22,000 crores. Which government can withstand this kind of attack? So central government very deliberately and planned may settle the finance of state government, put it into crisis. So you mean to say the developmental activities like the infrastructure, Kela is one state which spends a lot of money in the public education system, health care system, and even the welfare pensions. How these are affected by these attacks by the center? See, it is affected Kela government functioning. We pay nearly universal pension, old age pension, 63 lakhs are the beneficiaries. And we pay 1,600 per month. Okay, so during the COVID time we decided this money should be paid regularly every month. Otherwise, each month the payment would require something like 1,000 crores. Governments would have very serious ways and means problems certain months. So we formed a pension company which was mandated to provide pension. If government was unable to give the money, they would borrow and give the pension on the 26th of every month, next three months pension. So system was functioning well. They borrowed some 12,000 crores and state government repaid already nearly 9,000 crores. What does the center government do? 12,000 crores borrowing has been considered excess borrowing by the state government and they are going to deduct it from the current borrowing of the state government. Second was an institution called Kiffby. Now normally, all state governments in India, I think even central government undertakes the annuity program. Suppose a big project is taken and the government doesn't have money, they will say contractor, you borrow and implement the project. We will pay in the annuity spread over 20 years or 15 years. So contractable factor in the interest for this borrowed money into the estimate and he will participate in the tender. So this is normal process. Contractors borrowing for the government but never has this been part of government borrowing. Even Kerala, even UD was borrowing, they were implementing this in a big way using annuity program. When I did calculation, what was this implicit interest rate? Standing here, minimum interest was 12 percent and in one case it went to 22 percent. See, contractors, you can borrow hundreds of crores are very rare and therefore there is no competition, they are able to hike up this. Okay. So we said no more of this. This is very costly way of constructing infrastructure. We will have very efficient public sector company manned by professionals headed by very senior respected financial professionals from SEBI, banking sector and so on. In fact, only two bureaucrats, three bureaucrats inside the director board, both are equal, the professionals and officials and it has a fund trust fidelity board headed by none other than Binodhurai former C&AG of India so that they watch what do function if anything is done wrong. So this is a very respectful company to which government said it would pay annuity of half the motor vehicle's tax. So annuity program and this company would take loan and give to contractors so that cost of the projects would come down, project implementation becomes more efficient and some 80,000 crores rupees worth projects are being undertaken in Canada. Now, central government comes. One high boroughs is not part of the off-budget borrowing is off-budget borrowing. It is even listed by the finance minister in the central government budget but it does not form a part of the fiscal deficit. It's not considered part of the borrowing by the central government but here they go to C&AG to write is part of the borrowing. Now funny thing is that C&AG in 2019-20 same year C&AG objected to Kerala government borrowing. The Kerala government skipped the borrowing. It has stated in this review of the central government finances that Nirmala Sridharaman had understated off-budget borrowing instead of some three lakh crores, two lakh crores central government had in fact borrowed 4.5 lakh crores. But even then C&AG didn't want it to be part of the central government borrowing or say you can add it into your fiscal deficit. But here because of political reasons they made this remark and leaked it to the press. Of course, just on the eve of the election there was big fungus in the whole commotion and so on. We took to the assembly. C&AG's report is not a sacrosanct and so on. It is a document that has been discussed in the assembly rejected or accepted it and the assembly rejected it. Now central government says that is sacrosanct. There though it is not applicable to them. Today's this budget central government is still deficit is 511 percent. All the state government together it will be 2.8 percent or 2.9 percent. Central government has violently broken. There far be a act. State governments on the whole has complied with it and it wants to punish Kerala how with retrospective effect which is understandable say that we are central government we have determined this will be part of your fiscal deficit. We can debate with it but still central government is central government. Do you know what they have done? They have applied this with retrospective effect not the current borrowing of kiff me or its future borrowing but the borrowings undertaken from the inception of kiff me will be deducted from the current borrowing in the central state government. That's how 43,000 crore rupees came down to 20,000 crore rupees and put the state government in this financial crisis. This deliberately done to scuttle the state government in fastest. Now Nirmala Siddharamini is making big statement that is a record the CAPX expenditure and so on very good. But how is central government spending that money? They are giving to Nahai and so on. Nahai and so on borrow. He is Nahai's borrowing consider part of central government. The contractor who takes the implementation approach he also borrows and K class told later but it is subsidized. So do you still consider Nahai borrowing as part no but in Kerala is different you have stick. So this is the discrimination that central government is subjecting Kerala to and that's what we are protesting. And again the central share has been reducing and as you said the state's own tax revenue received has also increased. But on the spending part the state government is spending around 70 or 72 percent towards the other expenses and the central share is around 20 percent. So how is it possible to manage this gap from the. See these funny people in the center they want to brand it their way. What branding? Farid Aishman the total share of central government subsidy in Farid Aishman comes to less than five percent because Kerala this five lakh insurance scheme is probably applicable to BPL which is only 10 lakh people 32 lakh people and those who are outside the above 32 with this BPL enlarged BPL list they are under a different scheme of insurance not initial insurance. So the overall insurance for insurance central government contribution is less than five percent here and they think what to name it as this in life projects they give four and a half lakh rupees for each house and if land is also about 10 lakh and the central government gives 72,000 per three amount rest is all given by state government and central government also only gives for a part of the beneficiaries BPL beneficiaries. Now central government wants to put up Modi's figure I don't know what brand in front of the house are they are shaped here why don't they accept the dignity of the people we spend this money money no picture of chief minister or even state government is put on the outside wall of the house the dignity of the human person living there is affected here they have no sense of shame that come and demand unless you brand it you won't give you a thing KLA before the central government started thinking about PHC primary health center have been spending on them so that our PHCs okay we have called them now family health centers historically he spent so much and currently he is spending so much both immense in personal everything central government gave some paltry amount every year now they want to put to them from Hindi word which I don't understand from in front of a family health centers they call it branding so what central government has done is very mischievous you see 14 15 finance commission 14 finance commission had presented the purpose report when Modi became chief prime minister asked chief minister Modi was championing the course of states saying that 50% of the tax devolution must take place on the center to states but when he became prime minister he changed his stance he called why we ready the chairman of the finance commission and began to argue with him to reduce it to 32% roll it back he is a great man of great dignity here as the RBA governor so he told the intermediary Subramaniam the CEO of the Nidhi Iyer tell you was he has no choice that's what he said so Modi had to accept 42% and he made a joke in the parliament some of the state governments will not have treasury large enough to hold the money they're going to get therefore what he did you do he decided to stay he's a he no more taxing reasons only tax reductions to corporate sense but he needed money therefore he began to increase sessions or charges and then he did another thing centrally sponsored schemes state share was only 25% raised it to 40% 60% so the Kerala states like Kerala have add-ons also so the share went up so much so in the current budget the net devolution from the tax revenue minus this payment for the senderly sponsor would be just 32% same as what 13 finance commission has said you see see this is the way he has rolled back now he has assist in finance commission I think every state should sit up and think what's going to happen the agenda of BJPs what FRBM review committee engaging had suggested and which he couldn't not do in the last finance commission because COVID had come otherwise agenda was reduced the boring powers of state to from 3% to 1.75% by maybe in 3% for the central government this is the pet idea of and guessing which he had put into the and the central government has accepted his suggestions regarding the ceiling on borrowing the debt GDP ratio to be 25 etc they'd accepted it now this is the scheme strangulate not only Kerala every state government for the first time you are having in a country a political party which does not believe in the diversity of this country so they want a uniform homogenized India where regional aspirations are ignored and Kerala is resisting that leading that resistance