Remittance will not be there for some time. Tourism may not come back in full swing for the next five-six months, says Kerala finance minister Thomas Isaac
From dealing with one of the highest number of covid-19 patients at one point, Kerala is turning a corner with the infection curve plateauing. In a telephone interview, state finance minister Thomas Isaac spoke about Kerala’s battle against the virus, what lies ahead, restarting the economy and high debt levels of states. Edited excerpts:
Is the worst over for Kerala in the covid-19 crisis?
I was checking the data. Going by international norms for covid-19 spread, each person should have infected two to three others. But, the total 254 primary covid-19 patients, who arrived from abroad and started (spreading) the infection, caused the secondary spread to only 91 in Kerala. The international mortality rate is 5.75%, so Kerala would have recorded some 15 deaths. We had only two deaths so far, a mortality rate of 0.58%. So, it looks like we have been able to beat the virus, twice. Our first wave of infections started in January-February, with the return of three students from Wuhan. We managed to tackle it effectively without any secondary infection or death. Then, we had the second wave in March with a huge inflow of people from European and Gulf countries.
But we are expecting a third wave of infections once the borders are reopened post-lockdown. A large number of Keralites from other states and overseas would like to return to the state. This might increase our cases. But we are fully confident and ready. There will be thorough testing of everyone. We have already readied 175,000 isolation beds in hospitals, hotels and so on in anticipation of the third wave.
How do you plan to restart the economy?
We are in no hurry to reopen. This is a disease that doesn’t allow you to plan too much in advance. Each day is important. So, we will see where things are going each day and plan accordingly. There would be 1-2% hit on Kerala’s GDP (Gross Domestic Product). Remittance will not be there for some time. Tourism may not come back in full swing for the next five-six months (Tourism and remittances are some of the mainstays of Kerala’s economy). We will stagger the reopening of the economy. Agriculture will be allowed to open first.
But if the lockdown continues for too long, people may not be able to reopen businesses at all?
People should have enough food as well as money to stay afloat during the lockdown and after it. That’s why we injected a ₹20,000 crore stimulus. We ensured an income transfer of about ₹8,500 for nearly every family using advance pensions, free rations, food kits, and so on. And we offered a ₹2,000 crore consumption loan. We opened lakhs of community kitchens to offer free food. Budget hotels were opened to offer meals at ₹20. For migrants, we have not given them money but we have given them free food. You can’t mitigate this crisis without a lockdown, as long as it is required. But people should be provided with sufficient resources to stay at home. Otherwise, they would go out because they don’t want to die of starvation. And without the cooperation of the people, you are not going to have an effective lockdown. But yes, we know that even this may not be enough once we resume business. We would require more support from the Centre to do more.
How will you finance the debt burden due to covid-19? What do you expect from the Centre?
We have front-loaded all our borrowings for the year to April-May. I agree that this level of debt is unsustainable for states. All states are going to be in a major crisis if the Centre doesn’t allow states to borrow more. They should raise the debt ceiling of states to at least 5% (from the current legal ceiling at 3%). We are taking ₹6,000 crore borrowing from RBI through SLR bonds (Statutory Liquidity Ratio bonds). Another ₹6,000 crore SLR bonds will be needed soon. That is exhausting nearly half of Kerala’s entitlement of ₹25,000 crore SLR bonds. What is more atrocious? States have to pay 8.9% interest for 15-year term SLR bonds. This is at a time when GDP growth is bound to be negative. This is crazy. The Centre has not given anything beyond a measly flood disaster relief, other already budgeted funds and the GST arrears. Effectively, they are laying a macroeconomic strategy to reduce spending of states in such unusual times. So, in a slump, you have the spectacle of most states cutting expenditure, when they should, in fact, increase it. I have sent letters to all finance ministers for doing a webinar on this.
In an alternative universe, what could states have done differently if they had more money?
We would have given much better fiscal help to our people because this pandemic will surely continue for some time.
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