Wednesday December 31, 09:18 AM

Source: Indian Express Finance

Prefer investment push to write-offs, CDS study tells slump-hit Kerala

By Economy Bureau
Slowdown in small and medium enterprises (SME) credit, exports and tourism revenues are likely to hem in Kerala economy in the world-wide recession, according to sectoral impact analysis by experts. Expat remittances, prices of intermediate goods and prices of imported goods could also go tricky for the consumer-state, in the long run. Quickfix like loan write-offs are not sustainable in stemming suicides and other panic reactions, cautions the report Global Financial Crisis and Kerala Economy: Impact and Mitigation Measures , prepared by the Centre for Development Studies (CDS). The State should ideally go for winning private investment, take social security measures, stimulate bank/co-operative credit flows and push for crop diversification to toughweather its economic terrain, prescribes the study. The recession period could also be taken as an opportunity for physical infrastructure building, as the prices of intermediate goods and import goods fall. A simulation study by CDS, at the behest of the Kerala government, speaks of 95% possibility that Kerala s NSDP growth rate (in current price) will be between 5.15% and 7.56% during the next couple of years because of the impact in the six major sectors. This means the State s GSDP growth rate could fall by 2% to 3%. The study takes the grave tone that those on APL (above poverty line) threshold may tumble to the poor and vulnerable sections category due to the impact of crisis. Those working coir, cashew, fishing sectors, unorganised labourers in trade and hotels and farm workers depending on crops like pepper may be affected the worst. Strenghthening ration shops in the PDS chain, enhancing food production, removing legal imbediments to allowing women-run self help groups from participating in leased land paddy cultivation, improving NREGA coverage and working out health insurance models are some of the social security measures prescribed to fight recession-squeezed unemployment. The CDS study unequivocally pips for a Keynesian push at demand side, ramping up Kerala s private investment urgently. Public investment is inadequate to give a momentum to economic development, says the report, adding that the State s NRI diaspora could be utilised for stimulating direct investment. The report doesn t quibble the least in its approach to PPPs or SEZs. Factoring Kerala s comparitive disadvantage in manufacturing sector, the State government may have to drop its attitudinal restraints about allowing industrial parks with SEZ tag from earmarking huge areas for residential, commercial and other service-oriented activities. The State government is also advised that there should be clear signals that PPP contracts in infrastructure will not be subjected to political tussle and administrative corruption. This can be fruitful only if long standing cost and sharing agreement could be arrived at between state and private investors, says the CDS study.