Covid jolt to Kerala economy severe; fears of reverse migration loom

Covid jolt to Kerala economy severe; fears of reverse migration loom

The after-shocks of the coronavirus, which have already hit at the foundation of the global economy and nudged it to the brink of collapse, can be even worse for a small State like Kerala. All because the State’s existence has been on the money remitted from its people working abroad, the long-winding queues of boozers, the millions who try their luck with lotteries and the massive numbers who fill fuel to run their vehicles which have dotted most of the porches of Kerala homes.

Earning the tag of God’s Own Country and being a tourist hotspot, Kerala thrived on the inflow of holidaymakers from within and outside the country. This has dried and its revival may take years as economies all over have come to tatters and none can predict when people abroad will take to the luxury of holidaying. Besides, there are the small and big farmers, mainly into plantations, whose contribution to the production of rubber and spices as also beverages has helped sustain the economy.

The ongoing 21-day lockdown has already seen the revenue resources of Kerala dry up. The State has earned the tag of being a remittance economy with NRIs chipping in around Rs 1.7 lakh crore annually, accounting for nearly 40 per cent of the total bank deposits. But with the scene turning bad and the future looking bleak in West Asia or Gulf as Malayalis term the area and the US, there is expected to be a massive exodus of non-resident Keralites (NRKs) back to the State from these areas which could spell disaster.

While Keralites going outside the State for employment was tradition, the economy took a turn towards appearing prosperous during the 70s with an exodus to the Gulf. This history of its people seeking employment in Gulf countries and bringing in wealth from there drove demand for household consumption and also resulted in a boom in residential construction. But all that now seems to be on the verge of tumbling down since the economies there are in hard times and the State could well witness reverse migration.

Resources in the State are scarce and COVID-19 has spread destruction across the quiet sustainable plantation sector. Jose, a small farmer in Wayanad, shares his tale of woes which is similar to that of many others in the State. The good monsoon during the last season saw tea estates have high production. But now with the lockdown, there are no takers for his green leaf. With no workers, plucking has also been affected. In case there is a delay, the leaves will have grown to levels beyond plucking. “Once plucking starts, and we can’t say when, it would take at least a month after pruning to start the whole process of two leaves and a bud. We also don’t know if there will be demand for the tea,” he laments. Workers have no job.

This is also a cardamom plucking period and there are no workers available. It was generally migrant labour that undertook the job. But several of them left much before the lockdown. There is practically no demand for ginger and turmeric and even if farmers succeed in selling their produce it can never be in any way remunerative, say farmers.

As far as rubber is concerned in the State which is the largest producer accounting for over 80 per cent of the country’s production, the economic slowdown before the lockdown resulted in low intake by the tyre industry. With the crude oil price sinking, use of synthetic rubber will see poorer demand for natural rubber. This will prove further disastrous for natural rubber growers.

Already, the construction sector had been on a slowdown and with the lockdown, it may take a long time to revive the sector, say those in the realty industry,

As far as the State Government is concerned, practically all revenue sources appear to have been closed. With the sale of liquor banned, following coronavirus, a major source of income has gone dry. The total annual turnover of liquor sales in the State during 2018-19 was at a record Rs 14,508 crore and the revenue to the government excise department was Rs 2,521 crore which was expected to be Rs 2,609 crore at the end of this fiscal from the around 300 retail outlets, 598 bars and 357 beer and wine parlours.

The State's revenue from the lottery during the fiscal 2018-19 was Rs 9,276 crore and the profit earned was Rs 1,673 crore. It had projected a revenue of Rs 11,800 crore in 2019-20. But with lottery sales not happening during this lockdown and with no practically no income sources as a result of the lockdown, there is going to be a massive financial crunch for the Government. Also, the lockdown has seen petrol and diesel intake nearly trickling, blocking another major revenue source through duties.

To add to the woes of the State Government has been the Central Government’s decision to put on hold the MPLADS fund for two years. The Rs 5 crore annually for the 29 MPs, including those in the Rajya Sabha, from Kerala was being used for developmental activities in the State. But the present move, seen as an attack on the federal character of the country, will see further drop in funds for development activities.

Liquor, lottery, petroleum products and motor vehicles have remained the major money-getters of the State Government accounting for around 60 percent of its own revenue sources. Indirect taxes account for around 70 per cent of the State’s own revenue which has plunged to abysmal levels in the wake of the lockdown.

Over 52 per cent of the State’s expenditure is towards salaries and pensions which would mean a major challenge for the State in these trying times. It has gone in for a salary challenge asking its employees to contribute a month’s salary to the CM’s fund. Already, such an attempt during the 2018 floods had invited stiff opposition from a section of the employees. This time, too, the situation can be no different.

Moreover, the State Government has to face the quite indifferent attitude of the Central Government in providing relief which was witnessed during the devastating floods. For a State which has done little in its `Rebuild Kerala’ after the 2018 floods, the pandemic has come as a double whammy and the grave threat of reverse migration from the Gulf can make things worse for this consumer State.

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