New Delhi: The Kerala floods will erase at least two percentage points from the state’s economic growth rate on account of a hit to tourism, crops and small scale and traditional industries, state finance minister Thomas Isaac said.

The state, which is seeking resources for flood relief, will have to rework its capital spending plans as the budget has come under strain, Isaac said in an interview.

The minister said the floods caused losses across sectors, and that the widely quoted damage estimate of 20,000-25,000 crore refers only to assets and crops—excluding loss to income, which may be even greater.

“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. Therefore it is likely that growth rate in Kerala’s gross state domestic product (GSDP) may come down by at least two percentage points," said the minister.

Isaac said that Kerala’s economy has been growing faster than the national average, but that this may change now. In 2016-17, Kerala’s GSDP grew at 7.4%, compared to 7.1% growth in India’s gross domestic product (GDP).

The sudden requirement of funds 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 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," he said.

Kerala is seeking central government nod to borrow up to 4.5% of GSDP, up from the 3% cap now, and levy a 10% cess on state’s share of the goods and services tax.

The minister said that the state will critically review its policies to assess how sensitive authorities have been to environmental concerns and draw up a long-term plan for sustainable development, including measures to prevent ingression of sea into land along the coastline.

Isaac said that despite the existence of dams, rains have created flashfloods, which points to the fact that the water retention capacity of watersheds have come down, which he said presents a dangerous situation. “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 water retention capacity of key geographical areas.

“There has been a long chain of landslides which point to wrong land-use pattern... I am of the position that we must be environmentally sensitive," said Isaac.

“In times like this, the central government should give us at least 25,000 crore. We are also asking the Union government to be more liberal with the centrally supported schemes," said Isaac. Industry representatives have said demand for goods and services in the state is expected to decline by at least 50% in the next three months compared to same time a year ago.

Care Ratings Ltd said in a report that about 4.1 million jobs have been affected in the five worst-hit districts of Idukki, Eranakulam, Kollam, Kottayam and Pathanamthitta. It said plantations and tourism have been affected the most

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