Kerala - Thiruvananthapuram

Meltdown to have impact on the State: Isaac

Finance Minister T.M. Thomas Isaac says growth rate may fall to 6 per cent.

THIRUVANANTHAPURAM: Finance Minister T.M. Thomas Isaac on Monday painted a grim picture of the situation evolving in the State in the wake of the ongoing global economic crisis.

Replying to a submission in the State Assembly and elaborating the points at a press conference later, Dr. Isaac said exports from Kerala had come down, prices of cash crops were declining, tourism and information technology sectors were facing a downturn and there was a squeeze in the credit market.

The Minister said the growth this year may come down to six per cent from last year’s eight per cent. And, around one-and-a-half lakh people in the State may lose their jobs, according to an assessment made by his department. The job loss would be mainly in the unorganised traditional sectors and plantations. It would manifest not as people being thrown out of employment altogether, but as a substantial reduction in the number of work days, he said.

The only silver lining on the horizon was the increase in remittances from those working in the Gulf countries [which may help circulate some money in the system]. But the trend in remittance inflow too could change, as it was linked to factors that could change quickly.

He said coir exports went down in bulk by 16.17 per cent this September as against the previous year. The returns fell by 9.76 per cent. The trend was down in October too.

Exports of marine products fell by 30 per cent in quantity and 31 per cent in dollar terms this September compared to the corresponding period in the previous year.

Cashew exports, which had fared quite well in the beginning of the year, dipped by 25 per cent in October. Cashew nut fetched a price of $3.6 a pound in June-July. In October, the price fell to $2.6 a pound (one pound is just over 453 grams).

Pepper exports from the State came to only 14,750 tonnes during the April-October period this year, as against 22,800 tonnes the same period last year, dropping by 35 per cent in bulk and 25 per cent in returns. Spices exports in general came down by 16 per cent in bulk in October compared to previous year. The income from spices exports, however, registered a marginal increase of nine per cent in October, he said.

Tea and cardamom exports are looking up for the moment, but that is due to a fall in production of tea in Kenya and cardamom in Guatemala this season.

When the production in these countries recovers, the exports and prices of these two commodities can go down, Dr. Isaac said.

Coffee too has had a good run since January this year, until it started sliding in October following the fall of a global investment company that was deeply involved in the commodity’s futures trade, Dr. Isaac said.

The global economic meltdown has already begun to have its impact on rubber and coconut, two major cash crops of Kerala sold mainly in the domestic market.

He said liberalisation of trade in recent years had totally exposed the State’s rubber products to the vagaries of the international market. Recession in the car industry and the fall in prices of synthetic rubber (in the wake of the fall in international crude oil prices) had brought down the price of natural rubber. The price of RSS-4 rubber fell from Rs.142 to Rs.62 a kg between August 28 and November 21, Dr. Isaac said.

Palm oil prices had come down in the international market by 41 per cent between March and October and soy bean oil prices by 30 per cent between July and October.

The Centre was not only permitting unrestricted imports of these commodities, but also selling them at subsidised prices through the ration shops.

The prices of coconut and coconut oil can fell alarmingly because of this, the Finance Minister said.

He said Kerala was expecting a 20 per cent fall in inflow of foreign tourists this year. The global economic crisis had started affecting investments in the information technology sector too in the State, he said.

A major characteristic of the current financial crisis was credit crunch. The growth in bank credit for the country as a whole during the one-year period ending on October 31 was 29 per cent.

It was only 10.7 per cent during the six-month period ending October 31, suggesting that the banks had suddenly started becoming cautious about lending.

This change in the bankers’ sentiment was badly affecting exporters and traders, he said.

Dr. Isaac said the Centre should involve all the States in formulating and executing effective measures to lessen the impact of the global crisis on Indian economy.

Kerala has already started initiatives to mobilise the other States behind this demand.

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