The Hindu : Kerala's financial conundrum

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Saturday, Mar 09, 2002

Opinion

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Kerala's financial conundrum

THE MONTH-LONG standoff in Kerala between the A. K. Antony administration and the striking Government employees reveals the difficulties ahead in the task of restructuring State finances. That the austerity measures were in the offing was obvious from the tenor of public pronouncements made over several months, especially the White Paper on the State's Finances issued last year. More than the measures introduced, the manner in which the task was done and the restive positions adopted have resulted in this unhealthy confrontationist approach. One direct lesson from the ongoing strike is the importance of putting in place an acceptable implementation mechanism for economic restructuring. This should include a process that gains the confidence of the constituents that are at the receiving end of the reforms. A clear pronouncement of the ailments, the proposed cures and appropriate alternatives are important steps for States which have to take such difficult decisions in the years ahead. The importance of incorporating political opinion from a broad spectrum, and even within the ruling party, should not be lost especially when it comes to decisions that impact on sensitive constituents such as Government staff.

Whether the strike entered its second month despite or because of the hard line taken by the Antony Government is a moot point. Experience has it that in normal industrial disputes, the moment a strike notice is issued, a reconciliation process commences. In the case of larger, State-level protests, such as the one Kerala is witnessing, it is the administrative machinery and the political players who come into play. On them rests the responsibility of putting in place a mechanism that effectively redresses the grievances, both perceived and real. Given the nature of administrations, the hard stance taken by the Kerala Government was along predictable lines. However, the time has now come to re-think the manner in which the Government plans to carry out its fiscal correction process. The White Paper, which presented a dismal picture of the finances, laid down the three ways out: options for resource generation, options on the expenditure management side and measures for three major Public Sector Undertakings. The austerity measures — which are at the root of the present standoff — are expected to save close to Rs. 500 crores during the year. The natural question that should be convincingly argued is the immediacy with which the Government chose this alternative. It is also time to consider the effectiveness of alternatives, given the White Paper's projection of raising Rs. 1,435 crores through additional resource mobilisation. The argument by the Government's critics on the tax shortfall of Rs. 2,950 crores also merits consideration. The sensitivities of the Government employees should be seen against this broader backdrop of choice of options the administration has to shore up its finances.

A clause-by-clause review of the 28 austerity commandments will be a good starting point for a scaling down from the entrenched positions that the Government and the striking employees have got themselves into. The Government employees will also have to be convinced that the measures have to be adopted in the long-term interest of the State. It will also be in order to recognise that Kerala is not alone in this politically sensitive task of restructuring its finances. As much of the financial difficulties that States face arise from higher salaries to Government staff, it is time administrations consider their employees as part of the solution, not merely as a part of the problem. In difficult times, nothing works like a rational conversation. Shutting the doors on any meaningful dialogue will only escalate the distressing situation.

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