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Kerala's Economy Will Be Hit Hard: Finance Minister

Publish On: 28 Apr, 2020 02:55 PM | Updated   |   Shivalik  

Kerala Finance Minister Thomas Isaac, a former professor of economics feels times ahead are going to be critical as the world comes out of the Covid-19 crisis.

He points at an unprecedented recession in India with Kerala's economy to be one of the worst-hit.

A comparatively late entrant into the field of politics at 49 then, still a teacher of economics at the Centre for Development Studies, whose first pet project was People's Plan Campaign, has been cut up with the Centre as Kerala's financial crisis has worsened.

With Covid-19 striking hard, IANS caught up with the 67-year-old Minister, who feels getting back to normal times will not happen anytime soon. He bats for the stimulus package and proposes borrowing 5 per cent of the GDP from the RBI and allowing half of it to be given to the states. 

As for the state, he feels the Pinarayi Vijayan government has done well even within a month, looking ahead he feels Kerala should dig deep into it's healthcare image -- pharmaceuticals, nurses training, etc.

Here are excerpts from the interview: 

Q: Can you please explain what this Covid-19 would be for the country in general and Kerala in particular?

A: India's economy will shrink by 10 per cent and this will lead to the biggest recession, the country has ever witnessed. With regards to Kerala, its economy would be worse than the country's, as the remittances will take a huge beating leading to reverse multiplier effect.

Q: How long do you think this crisis would last ?

A: You can safely forget this fiscal, for sure and it should be the same globally too.

Q: What's the way out for this crisis and what would be a prudent handling of finance?

A: The Centre should borrow 5 per cent of the GDP from the Reserve Bank of India and give half of it to the states. The rest should be used by the Centre for a stimulus package. The Centre should transfer Rs 7,500 to each and every Jan Dhan account, besides give 50 per cent of the potential last year's wages paid under the rural employment guarantee scheme as advance. This can be adjusted during the year.

Q: What else?

A: The Centre should introduce a universal pension scheme. With regards to the MSME sector there should be a moratorium on all loans for a year with the Centre bearing the interest burden. The banks should be asked to provide 25 per cent for working capital.

Q: There are reports that companies might move from China. Do you think that will benefit India?

A: I seriously doubt about that as China is hugely mechanised and India just cannot match that. Other South East Asian countries might get an advantage. Perhaps, labour intensive units might look towards India. 

Q: What steps have you taken to see Kerala does not fall deeper into trouble?

A: We have already pumped Rs 20,000 crores into our economy which includes payment to small time contractors. This money effectively circulates in our economy. Rs 8,500 each have been paid to people as social pension that is worth Rs 4,500 crores. Besides we have paid Rs 1,000 each to all people who do not fall into any pension list. Just take a look around and see, things after a month appear to be stable. By the end of May we will settle all out standings that are due to people under various schemes and heads. I think we have done a good job.

Q: What about Kerala and its prospects in the aftermath of Covid-19?

Ans: The biggest advantage Kerala has is its hugely popular 'Kerala health brand'. It is in that our state should tap into sectors like pharmaceuticals and medical devices. Urgent steps have to be taken by our Industries Department to set up pharma and medical devices park. Our state-run Kerala State Drugs and Pharmaceuticals can take the lead and we are planning to make it a Rs 200 crores company, to make use of the Kerala brand image.

There is also a huge scope for Kerala nurses and the need of the hour is to train and keep ready about 25,000 nurses. They should be professionally trained by sending them to finishing schools and get them certification ready. The potential worldwide is huge and we will do everything to tap this.

Q: In Kerala, everything is linked to politics. Do you think the Left government has walked into the hearts of the people?

A: Yes, we feel that people do appreciate what we have done. Chief Minister Pinarayi Vijayan has been able to carry everyone along. The first signs that we have done well will be reflected in the local bodies election. The opposition here has been taking a negative stand. If they have any sense, they should join in bringing solace to the people, if not they will be isolated. I feel they are on the wrong track.