Price hike and a helpless Government

Onam is fast approaching. Is Kerala under the grip of inflation?

The picture given by the ruling and the opposition parties in the state assembly as well as the Finance Minister now doesn’t provide any relief. Minister T M Thomas has said that prices have hiked up to 2.13 per cent in the state last month. Although inflation have plagued the state for quite some time, he was repeatedly denying the facts with the aid of estimates and theoretical rhetoric. The explanations he gave was that certain earlier taxes weren’t shown in the bill but it was shown in the newly launched Goods and Services Tax (GST) bill and it was what seemed like a price hike. However, the Minister admits an increase in prices after the study by the assembly council. It’s while trying to find the solution to the problem, that more apprehensive aspects surface; that the state government is unable to do anything on its own! It’s because of the GST. It’s the GST Council that has to do something in this regard. In short, the Minister has made another confession bigger than admitting the price hike- that the market and economic system on which the state government earlier had partial control, has now gone out of control. The economic powers of the state government have been handed over to some remote council. The government has nothing to do in the matter of inflation that triggers apprehensions across the state except that it would raise the matter in the GST Council and pressurize the Centre to intervene in the matter. That’s all. In short the government elected by the people could do only what the people and the society could. File a petition if possible and then, pray from the heart.

Despite the logic, Minister Thomas’s irresponsible statements couldn’t be ignored. He critisises the Centre’s sloppy approach. His demand to take measures against those hiking prices of commodities wasn’t accepted by the GST Council. He is one among those who backed the Council. The argument now is that it was not the GST but its way of implementation that was clumsy. And it is right as well. The uncertainty in the case of procedures and tax rates has landed many industries and agricultural endeavors in crisis. The slightest relief is that the countries where GST has been implemented had experienced ‘temporary’ issues for 1-2 years and would witness beneficial results once the issues were sorted out. Even if all these facts are accepted, was it a failure to notice that the GST system of authority snatches the power of the states? In the GST Council, the Central government will have one-third of the votes cast and the states together will have two-third of the votes. The decisions of the council will be made by three-fourth majority of the votes cast. That means that it’s the decision of the Centre with 33 per cent of votes that will be the decision of the GST Council. Since the tax is imposed on the consumers, the Minister claims that imposing GST would benefit Kerala which is a consumer state. It’s right. Since the tax revenue increases, it would benefit the Kerala government. But doesn’t the latest developments give off a message that it won’t be the same for the people?

It’s when the states have the power to take political and economic decisions that a federal system becomes meaningful. GST topples that system. It might one of the reasons for the US and the European Union, a ‘potentially larger market’ for not implementing GST. Gujarat which is an industrial hub, Punjab a leading agricultural state, and consumer states of Kerala and Uttar Pradesh coming under the same kind of centralized tax rule is certainly convenient and beneficial to the governments and corporates. But usually, it is not same for the people. The sectors such as petroleum and real estate which is more beneficial for the public is free of GST. That’s the reason why it’s possible to hike up the petrol and diesel costs even when they come down in the global market. With nearly a month under GST, the advantages and benefits foreseen is not visible yet while unprecedented disadvantages are seen popping up. The only solution is to wait for the mercy of the remote and hideous GST Council.