Friday, December 26, 2008

Global Economic Crisis and Kerala's Future: A report from CDS

THE CENTRE for Development Studies, Thiruvananthapruam, has released its report on Global Financial Crisis and Kerala: Impact & Mitigation Measures, following a request from the State Government to assess the impact and possible measures and policy changes required to overcome he crisis.

The 98-page report (available online at is one of the first major attempts to put in perspective the crisis and how to face it and also possibly convert it into an opportunity to refocus on our economic priorities. The following observations are on the basis of the executive summary of the report which I had seen yesterday.

What strikes me as an extremely important warning signal in this report is that the already feeble sections of our economy and society are going to be hit hard again in this crisis. These segments, according to the report, are the traditional industries like coir and cashew, the cash crops like pepper, coffee, tea, rubber and spices, fish workers and other export oriented sectors, all of whom are dependent on a highly unpredictable global market. Unlike the IT units that are also likely to be hit, those employed in these sectors do not enjoy any financial stability or social security support at all. In fact most of them were already in dire straits, most of them neck-deep in debt and often witnessing a spate of suicides. I had occasion to do some work on the sectors like cash crop growers inWynad and fish workers in the northern districts. They are in a very serious plight and what has stopped- at least temporarily- the spate of suicides seem to be the steps taken as part of the Central Government intervention in recent months. Our own State Government's Debt Relief Commission has been a mockery of sorts as it could not offer any sensible aid to the majority of people who went there.

That, to my mind, is going to be our experience once again. We are going to get a lot of platitudes from our ruling politicians and precious little by way of action. In fact when I was reading State Planning Board vice chairman DrPrabhat Patnaik's tall claim in the Economic Review 2008 report that it was the State Government's Debt Relief Commission which had put a brake on farm suicides, I thought it was laughable because precisely at that point of time, things were quite different in the field with suicides spreading to new areas likeKuttanad rice bowl in the summer harvest season this year.

So this entrenched middle class segment that effectively control our political establishment, combined with the political leadership and intellectual bandwagon which actually cater to the middle class interest is going to be the real stumbling block in front of any reforms theCDS report calls for. The report calls for very serious policy shifts that will rekindle our economic activity, like a massive promotion of private investment, a private-public partnership, cut in subsidies in power, water supply and other sector to the middle class consumers, easing of legal hurdles in commercialization of agriculture, reducing controls on leasing landed properties, etc, which are all recommendations that go against the present rulers' economic wisdom.

A stark reality stands out in the report: The middle class would gain in this misery of the poor people, because when the prices fall their salaries are going to remain stable and real incomes rise. And when fresh money is pumped into the economy to recharge production, surely they will do everything to corner much of it and will stop any meaningful restructuring like rational power tariff or cut in subsidies or reforms in land legislation or introduction of the system of lease holding of lands to enable the landless to engage in cultivation.

Hence, it is necessary for the poor people to critically examine what is good for them, and not allow this middle class-controlled leadership to decide for them. I do feel that unless they make a determined effort to break this stranglehold of the government-employed, trade unionised middle class people who are holding sway in our public affairs, the really needy are not going to gain anything, and their misery would continue, they would keep committing suicide while the leaders would keep mouthing platitudes on how to bring in socialism...

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