New Delhi: The floods that ravaged Kerala will wipe off at least 2 percentage points from the state’s economic growth rate as tourism has come to a standstill, crops damaged and small scale and traditional industry severely hit, said Kerala finance minister Thomas Isaac in an interview. The state, which is seeking resources for flood relief, will have to rework its capital spending plans as the government budget has come under strain, Isaac said.
The minister said that the natural calamity has caused losses across sectors and that the estimated flood-related damage of Rs 20,000-25,000 crore refers only to losses relating to assets and crops, which excludes loss to income, which may be even greater. Isaac said that tourism, a fast growing industry, and agriculture have received a severe setback and it may take some time to recover.
“Paddy and other agricultural crops have been washed away and plantations damaged by landslides. For the last one month, the entire unorganized sector has come to a standstill. There is no construction, no activity in small scale and traditional industries. It is likely that the growth rate of Kerala’s gross state domestic product (GSDP) may come down by at least 2 percentage points,” said the minister.
Isaac said that Kerala’s economy has been growing faster than the national average, a situation that may change now. In 2016-17, Kerala’s GSDP grew at 7.4%, compared to 7.1% growth in India’s GDP.
The unexpected fund requirement for relief and rehabilitation is putting a strain on the state budget. The minister said that capital spending may suffer.
“There is going to be a significant rise in non-plan expenditure. A part of the plan will have to go for non-plan expenditure. This will have an implication for the current year’s expenditure itself. We will have to do slight restructuring of plan spending. Programmes in the plan will also have to be modified to take care of immediate concerns,” the minister said.
Kerala is seeking the Centre’s nod to borrow up to 4.5% of its GSDP, up from 3% now, and levy a 10% cess on the state’s share of goods and services tax (GST) to mobilize resources for meeting relief, rehabilitation and reconstruction expenses.
The minister said that the state will critically review its policies to assess how sensitive they have been to environmental concerns and prepare a long-term plan for sustainable development, which will also include measures to prevent ingress of the sea into land along the coastline.
Isaac said that despite the dams, rains have caused flash floods, which points to the fact that the water retention capacity of watersheds have come down. “Kerala has to preserve its canals and ponds, which is very important. We have to critically review if we have done this so far,” the minister said, adding that a green mission is trying to improve the water retention capacity of key geographical areas.
“There has been a long chain of landslides which point to wrong land use pattern. We will also critically review that. Nature has taught us a lesson that if you build things in the flood pain, it is going to be affected. This calamity is a point of introspection about how sensitive are Kerala’s development policies to environmental concerns. I am of the position that we must be environmentally sensitive,” said Isaac.