The economic effects of the COVID-19 pandemic will be felt world over, and the situation will be no different in Kerala. In fact, considering that the state has had to face two floods in consecutive years, followed by the pandemic now, the state’s Finance Minister Thomas Isaac says the challenge is going to be double difficult.
In an interview with The News Minute, Thomas Isaac says that while the state hasn’t yet formally estimated the loss due to COVID-19, he would predict that Kerala’s Gross State Domestic Product (GSDP) would be 20% less than earlier anticipated.
This has been a bad period for state finances,” Thomas Isaac says, “We’ve faced recurring deluges consecutively for two years. Unless the Union government comes forward to help us financially, it is going to be very difficult to run the state’s finances.”
And the financial crisis, Thomas Isaac says, will be felt more in the month of April.
“The main source of revenue for the state government is from GST (Good and Services Tax), Sales Tax, Motor Vehicle Tax, Lottery, and Excise. There is no revenue from Excise and Lottery now, or Stamp Duty, or Motor Vehicle Tax. Even the revenue from petroleum sales has been hit. I anticipate that in March, we’ve only made one fourth of the revenue we usually generate. And this will be the case in April as well,” the Finance Minister says.
The state has been particularly hit owing to the shutdown of the Beverages Corporations’ outlets. With the highest per capita consumption of alcohol, the returns from the liquor sale contributes significantly to the state’s revenue. Despite the floods in 2019, liquor to the tune of Rs 1,229 crore was sold through Bevco outlets across the state in August alone.
Added to the loss of revenue is all the additional expenses the state has to undertake at this point to help the people. Kerala has announced a financial package of Rs 20,000 crore to cover health packages, loan assistance, welfare pensions, MGNREGS, subsidised meals, free food grains, to clear arrear and for tax relief. The state also provided food to the needy through community kitchens, apart from providing free ration irrespective of income slab.
“The borrowings of the state will be exhausted in the first quarter of the fiscal itself,” Thomas Isaac explains, “and then the real trouble will begin.”
“But as of now, we’re not worrying about the future. Our priority now is to ensure that ration is provided, wage is paid, and hence we are frontloading our borrowing and carrying forward,” he says.
Kerala has also asked National Bank for Agriculture and Rural Development (NABARD) to allow a revival package of Rs 20,000 crore in the light of the crisis caused by COVID-19. “NABARD can refinance our loans so that the government can make more money available to the people. But NABARD has not come up with anything so far, and so far there has been no response for the CM’s appeal to provide a package,” the FM says.
Further, the state still has to finance flood reconstruction works – mostly in terms of asset building, reconstructing destroyed roads, reviving farmlands etc.
“In the current scenario, it’s more important to provide immediate relief to people. People’s income has gone, which made the government provide them immediate relief. There is a difference in the nature of loss during the time of the flood and now – though both are tough to tide over,” he says.