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AN INSIGHT INTO CURRENT KERALANOMICS

AN INSIGHT INTO CURRENT KERALANOMICS
August 07
15:02 2016

My intention is not to scare people by screaming out that recession is here!  My wish is only to warn Malayalees, that if we do not think practically and act proactively, tough times are waiting ahead. It’s time to make development possible by proper planning and action. If not, the time is not far when our state becomes one of the poorest. When I started penning down these thoughts after observing the economic conditions and after speaking to people, I intended it to be a warning with serious concerns. But an incident that happened a few days back in my friend’s family has jolted me.  My friend’s cousin, whom I knew, had a high paying respectable job in Abhudhabhi. The 41-year-old passed away after suffering a heart attack. He was under severe stress and mental pressure because he had lost his job, as the senior staff in his organisation were getting laid off. He was shouldering the responsibility of his family, his aged parents and his brother’s family as he passed away six months back. The news left me numb and couldn’t resist the thought  that Keralites are sitting on a ticking time bomb that could explode any moment sooner or later.

For its development, Kerala is dependent more on the foreign exchange, especially from Middle East countries, rather than the government policy (Not forgetting the strong measures like land reform movements that were responsible for the reformation of the state.) Foreign exchange brought into the state by the “ Pravasi’s”(NRI’s) played a major role in the economic richness of the state and the high purchasing power of the people. The fiscal situation of Kerala that was once bright like an LED light has been dim and voltage-less for quite some time now. The Keralites who have achieved total literacy are seeing these blurred images like a person affected by cataract. If they do not clear their vision soon, then there will be an irreparable damage to the economy of the State.

Ok … I think I am speaking too much in this direction. Let us get back to the point of economy of the State. For those who correctly follow the income and expenditure of the state, there is no need for any CAG report, but can understand the seriousness of the issue. We are seeing the practise for years where the government is taking huge loans to meet the basic day to day expenses like provision of salaries and pensions to government employees. Financial experts know too well that it is suicidal to commit loans for revenue expenditures.

To explain in lay man terms, the financial health of the state is similar to that of a house hold where loans are taken to meet the daily expenses. Meanwhile if one can meet the daily expenses by other means  and loan is taken for the betterment of the house to buy a car or home appliances, we can say it’s good to an extent. The cash that one has after the expenses will go into repaying the loans, though it is a liability, it’s an asset creating one. Even in the State- Government’s case, if they are taking loans  for new projects or building new infrastructural facilities, we can say that it is advisable as the net worth of the assets are increasing. But in Kerala such capital expenditure is not being made; loans are in fact taken to manage day to day expenses!

Every year, during the budget presentation Malayalees look forward to knowing whether the price of combs and beauty soaps has reduced. The literate Malyalee friends applaud and criticise the government by looking at, for what products the price hike was made and for what it was reduced, they do not even look at the revenue and expenditure part of the budget. The line of thinking is that why should we look at those huge numbers?

Yes we should look at those numbers and that too very closely. This is precisely because it is from these numbers, that the words in the budget are born. How many people would have scrutinised the previous budgets thoroughly? How many projects announced have been implemented immediately? How much money is allocated for each project? How many of us think about the status of the state treasury in funding these projects?

Out of the projects that were announced, only a handful has been implemented, the number of non implemented are way too high. Even in the budget allocation there is a lot to contradict. The budget allocations are hilarious. There were many trolls in social networking sites criticising the budget allocations by the previous government.  Allocations are like Rs 1000 for purchasing BMW car, RS 500 for Iphone and Rs 250 for higher studies in England. If we look at the allocations we could clearly understand how many projects will actually materialise.

The point I am making is that the Government is in a debt trap. I cannot think of any ways in which the government can come out of this financial trouble in the near future. We need to look into the authenticity of Dr. Thomas Issac’s budget in this status. Of course it gave us a ray of hope. But we need to wait for the coming months to view the results.

One doesn’t need a doctorate in economics to understand that we need to provide water to the thirsty and food to the hungry. How many of the projects undertaken by the government are actually needed in the socio economic and cultural scenario of Kerala?  What is the use of keeping KFC chicken in front of a vegetarian? I am not elaborating. Think about it! How many of the celebrated high end projects today do we actually need?

Earlier it was the business men who had money apart from the NRI’s. But now even their financial status is not good enough to withstand the impending scenario.  We all know that Kerala is a consumer state. We are not developing or producing anything in the state (Barring fights, corruption, stabbing, rape and smuggling of narcotic substances we are not creating anything else.)   But we will purchase wholly what the other states are producing. Earlier Malayalees had the purchasing power to buy these, but currently the money circulation is not in balance.

From the construction of the Metro to other jobs that require manual labour, are being done by brothers from Bengal, Bihar, Orissa and Jharkand. These migrant labourers work very hard and save even harder. They survive on basic sustenance- eating  white rice, chappathi with tomato curry day in and day out. These migrant workers create an outflow of money from Kerala to their home states. If we look at the cash transfer of banks every weekend we can find that huge amounts of money have been transferred to these states. It’s calculated as nearly 25 crores of rupee outflow per year. This amount should have been spent here. Only then, the right money circulation will be complete. Money spent from one hand should reach the other hand. That is, the money spent by Kerala should return to the State in one form or the other. When the currency reaches other areas, the money circulation chain in Kerala gets cut off and it reaches the market of other States.

If we have good industrial or agricultural production here, we could have compensated to a certain extend. The migrant workers going back home will not even buy a peanut toffee from Kerala because if they cross the state border they will get the products at a much cheaper rate. When there is an announcement that a new factory of Ford or Hyundai is coming up, the Chief Ministers of Tamil Nadu, Maharashtra, West Bengal, Rajasthan will make all efforts to get that factory in their state. For Keralities the word factory creates a kind of allergy.

Kerala has to work hard to become a state to be an industrially and agriculturally self sufficient state. The reason why I am reiterating this, is due to the fact that the Gulf countries which were once a goldmine for Kerala is losing its glow now. With the drastic fall in crude price, the Middle Eastern countries are struggling to stabilise their budgets and balance of payment positions. Their sleep has been disturbed for quite some time thinking that oil will be cheaper than water. Like Kerala even they don’t have any other sources of income. Their agenda as a solution is developing other industries like tourism and education but it is a bit difficult to achieve this. How could they balance the revenue and expenditure when the oil prices have fallen to more than half, from Dollar 110 per barrel to less than fifty per barrel?

This is only a beginning, the worst is yet to come! The Middle East nations will bring in tax system to adjust, will increase the petrol prices. But they know very well that the problems cannot be solved by these steps. What else could they do? They will be forced to send back people from other countries including Malayalees who work very hard in gulf countries even if they won’t take a littered paper from the ground in Kerala. The process has begun. Many have lost their jobs and many have started packing their bags.

Imagine the situation when lakhs of people return to Kerala that already has its share of problems including huge unemployment. Either we all can join together and celebrate poverty or we should plan in advance by realising the situation. Pravasi’s please don’t be under any false impression that the debt stricken government of Kerala could help you. Please come back only after planning something for your future. I was talking about our business men. Even if the money was going to other states through the migrant labourers earlier we had our businessman to spend cash. But now even they don’t have the spending power.

Due to new regulations and policies by the government many were forced to shut down their existing businesses. The employees, who lost jobs when the establishments were shut down, is also sitting idle as if in solidarity with their employers. Just check the impact of bar policy of the previous government. Employees lost their jobs and the purchasing power of the bar owners and workers reduced.

When the government formulates a policy shouldn’t they think of those who would be affected or victimised by this policy?  To tell the truth, the situation is really bad. Before writing this article, I spoke to many business men, most of whom informed me that the business is less than half if they compare it to some years back. Only if people have cash they will spend it right?

The signs of recession are many more since a campaign is going on that there are no bars and business, but moral police and stray dogs in abundance,  foreign tourists have also abandoned the state. The tourism sector has been very badly affected. The other states and countries that were waiting for a chance are taking away our tourists and minting money.

Keralites should change and those ruling Keralites should also change. It is not wise enough to cut off the branch where we sit. While speaking about all this I forgot about the poor farmers who are in a much more worse condition.  Even the changing governments forget about them conveniently. Then how shall I remember? We should forget politics to a certain extent. The media should also be ready to carry on such burning issues than the ones like the masala mixed solar scandal.

The public and media, the fourth pillar of democracy should formulate a new “Economic agenda” and pressurise the government to implement that. My belief is that politics should be kept away in case of development. Irrespective of the parties, everyone should support the good policies.  Things will change if financial experts who have a clear idea of politics and history of the nation will come to the upper ladders of governance. Otherwise Keralites should prepare themselves psychologically to work in Bengal or Bihar. I am stopping now by telling that currently the patient is in ICU, before the patient is shifted to the ventilator we need to act positively.

Disclaimer: The opinions expressed in the above article are of the author. The Daily Brunch does not claim to endorse the any of the above views.

About Author

CHRISTINA CHERIAN

CHRISTINA CHERIAN

Christina Cherian is a former economics lecturer at higher secondary level as well as a financial journalist. She is a Post Graduate in Analytical Economics with B Ed in Social Sciences and a gold medallist in journalism. She has also donned the roles of a news anchor , voice artist , creative content writer and comedy artist.

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