New worries

FRONTLINE|June 5, 2020

New worries
Kerala’s measured approach to the pandemic and lockdown has yielded results. But it still has to grapple with their huge economic impact on its economy, which it feels the Centre’s special financial relief package does little to alleviate.
R. KRISHNAKUMAR

ALTHOUGH KERALA’S HANDLING OF THE coronavirus crisis continues to receive all-round praise, the State is on edge as it enters a tricky phase in its containment efforts, with the gradual easing of lockdown restrictions going hand in hand with the arrival of a large number of Keralites from COVID-19 hotspots abroad and from other States. There is another issue that nags the State in equal measure. This is the uncertain but huge impact of the pandemic and the lockdown on the local economy, which is yet to fully recover from a series of natural calamities: the Okhi cyclone in 2017 and the devastating floods in 2018 and 2019.

The State had held itself up bravely against these back-to-back calamities, but recovery was understandably still an ongoing process even as reports of the possibility of truant rains were once again clouding the horizon. Yet another worrying monsoon season is already round the corner.

According to State Finance Minister T.M. Thomas Isaac, Kerala will experience a revenue loss of nearly Rs.35,000 crore this year. As Frontline had reported earlier, in the State Planning Board’s assessment, Kerala suffered a loss of Rs.29,000 crore as a result of the nationwide lockdown from March 24 to May 3.

The Gulati Institute of Finance and Taxation (GIFT), an autonomous institution under the State government, was tasked with a study on the economic and fiscal impact of COVID-19 on Kerala. Its report calculated the likely fall in the State’s income on the basis of three assumptions. If it is assumed that things will get back to normal after 47 days of lockdown from April 1, the State will experience a revenue loss of Rs.79,300 crore; if the economy gets back to normalcy in three months, the revenue loss will be Rs.1,35,523 crore; but if it takes six months for things to get back to normal, a more likely prospect, the loss could be Rs.1,65,254 crore.

Despite the severe financial crunch, Kerala was the first State to announce an immediate livelihood package of Rs.20,000 crore and to ensure, among other things, provision of free food and accommodation, free rations and community kitchens for all needy people, including thousands of “guest workers”; release of all welfare pensions, including arrears and disbursal of interest-free loans to members of the State’s large Kudumbashree network, besides finding additional resources for its remarkable pandemic control measures.

By the beginning of May, the State was bitterly complaining that it was doing all this despite “zero income” and in the face of the Centre’s continuing apathy in announcing a relief package or other much needed assistance to States.

RESPONSE TO THE CENTRE’S PACKAGE

Chief Minister Pinarayi Vijayan said on May 15 that Kerala’s revenue and fiscal deficits would go up dramatically, with health and social sector expenditure rising exponentially. Just before that, the State government issued an ordinance to defer a portion of the salary of its employees equivalent to six days for each month from April 2020 to August 2020.

The government also indicated that more stringent cost-cutting measures might have to follow. It was, therefore, with some relief but a lot of caution that Kerala received the Centre’s May 12 announcement of a Rs.20 lakh crore special financial package.

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June 5, 2020