THIRUVANANTHAPURAM: Kerala has lost its biggest growth argument. The Economic Review for 2014-15 which was tabled in the Assembly on Thursday reveals that the state’s growth has for the first time fallen below the national average. If the average national growth during 2014-15 was 7.3 per cent, the state’s growth during the period was 6.2 percent. Stung by the fiscal crisis, the Review has called for “alternatives to existing policies”.
“Kerala which was apparently performing better than the national economy seems not doing so,” the Review notes in a tone of deep bewilderment.
The Review even notes that the magnitude of the crisis was not envisaged by the planners. Major growth drivers like agriculture, construction and tourism have been dealt heavy blows last year.
Declining commodity prices have decimated agriculture. “With the precipitous fall in commodity prices and with many of them hitting historic lows, the dependence of the state on a few commodities has made it vulnerable to external shock,” it noted.
And the prognosis is not better, either. “The ability of the State to support crisis-ridden agriculture is limited,” the Review states, virtually questioning the rationale of the much vaunted Rubber Stabilisation Programme.
If at all the state wants to attempt such a rescue, the Review has a warning. “It may be worth remembering the Brazilian coffee experience of yore: the more the government supports the more is produced, and both the sector and government sinks into deeper crisis.”
Increasing productivity is the only way out, it affirms. “Government support has to be redesigned to encourage productivity growth,” it states.
Alarming is the fall of the construction sector, one of the state’s most important growth drivers. “It was a high growth sector till recently but has not shown much growth during the last three years,” the Review states.
Along with construction, mining and quarrying has also taken a big hit, registering negative growth rates. As always, manufacturing continues to suffer. “While the number of PSUs has been large, there has hardly been any increase in their value of production or turnover during the last four years,” the Review notes.
The Review is concerned that remittances, the one big factor that had propped up the economy, could dry up. “Threats loom large on the horizon as the employment situation in West Asia has been stressed with the drastic fall in the price of crude oil,” it notes.
If this happens, the rate of growth will dip to below 5 per cent. The Review has also confirmed what the State has always attempted to mask. It states in uncertain terms that foreign tourist arrivals have declined. It considers declining tourist arrivals as one of the factors that have pushed the state into a crisis.
The Review states that lower growth and falling commodity prices have ensured that the state’s revenue receipts have fallen below estimates for three years in a row. Further, the tax revenue increases are decelerating.
“Cumulative increases till November 2015 of both income tax and corporation tax has fallen below 10 per cent,” the Review notes. What’s more, the state’s debt has swelled at the rate of 14-15 per cent annually during the five years of the UDF regime.
