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Kerala, Made in West Asia, Staring at Abyss

Published: 30th January 2016 06:46 AM  |   Last Updated: 15th February 2016 08:08 AM   |  A+A-

Gold-Rush1.jpg

Part 2

Lure of Lucre Diminishes for Rubber in Kerala

Part 3

Big Attrition in oil Sector Puts the Skids on Keralites

The distress signs of an economy coming unstuck are there for those who are willing to look. The impact of the double whammy - the Gulf slowdown and the rubber price slump - is most visible in the real estate sector across the state.

Large tracts of land, mostly under rubber cultivation, that used to fetch upwards of Rs 60  lakh an acre are going at half that rate, mostly with no takers. Many jewellery marts that opened shop with great fanfare in the B and C category towns have begun downing their shutters.

A catastrophe is definitely in the making for Kerala as it is not only the white collar  but also the blue collar segment’s job opportunities in West Asia that have shrunk dramatically over the past 12 months. But the state government is not ready to press the panic button yet.

Reason: The state is not facing a mass exodus back home and till that happens the government does not believe its hands-on intervention is warranted. Those who doubt this approach, please check the laudable scale of intervention it took upon itself when faced with various crises, from Iran to Libya. Also, for a state that is getting into election mode, a nuanced counter-strategy for a crisis that may or may not transpire is hardly a priority right now.

GRGraphic4.jpgKerala Economy Sitting on Powder Keg

Though the repercussions of the slowdown in the Gulf region are felt in the state, the state government is on a denial mode.  Speaking to Express, Minister for Non-Resident Keralites Affairs K C Joseph admitted there was trouble brewing, but indicated that no immediate intervention was warranted: “Yes, we could soon have a problem from the Gulf region. It is definitely going to hit Kerala hard. Even at the current rates, crude prices are forcing companies in West Asia to retrench staff. If the prices fall further, we will be facing a dangerous situation, given the number of Malayalees in the Gulf,” he said.

Though the government does not feel compelled to act in a hurry, the magnitude of the disaster that’s in the making can be gauged from the goings-on at some of the big ticket recruitment companies that specialise in Gulf placements.  A senior manager of the Kerala operations of one such company said their recruitment to West Asia had dwindled by almost two-thirds, from around 6,000 in 2014-15, with only two months to go for the current fiscal to end. And it was the blue collar hiring that had taken a major hit.

GR2.jpg“It is very much the blue collar segment that has been most affected, in terms of hiring. We are no longer hiring nurses following the government intervention. Hiring of skilled labour - welders, pipe-fitters, fabricators, even plumbers and painters - is down 70 per cent, while labour for construction sites has gone down by 80-85 per cent. Our hiring is now mostly limited to the retail sector - Gulf super markets are still hiring,” said the general manager of the company on condition that his firm would not be named.

 He was quick to point out that most GCC governments were cleverly intervening by delaying the issue of visas. “We used to hire personnel for most sectors taking into account two-three months as lead time for visas. Now, these same visas are taking six-eight months. By the time the process gets completed, either the employer’s needs have changed or the employee is no longer available. New jobs in the Gulf are fast disappearing,” he added.  According to the state government figures of 2104, out of 16.2 lakh non-resident Keralites the world over, about 15 lakh are in West Asia. However, other figures, also from the government suggest that the number of Gulf Malayalees is around 24-25 lakh, going by the remittance data. Forex deposits in Kerala banks add up to over Rs 1.2 lakh crore, and remittances account for 33 per cent of the state GDP.

 If things go unchecked, remittances for April-June 2015 at Rs 1,17,349 crore, up 7.06 per cent or Rs 7,746 crore over the previous quarter, but only a 3.63 per cent growth in the June-September quarter at Rs 1,21,619 crore, 2016 could witness a negative growth for the first time in many years. Therefore, one shouldn’t be surprised that Kerala has reasons to be more worried than other states in India. It can only be a temporary relief that the nervous and what was for a long while an unstoppable slide of crude prices from around $50 a barrel a month ago to $20 has been temporarily reversed at $28 and is now perched at $32.

 “The Kerala economy is like a barrel of gun powder that awaits some stray incident to catch fire, and the resultant bang could have reverberations that are loud and far-reaching. Not many seem to be connecting the dots between the slump in crude prices and that of natural rubber. The distress signals are already there for all to see, but, as is the wont, when dark clouds gather, we would always wait for the sun to shine through. We should also plan for the worst-case scenario,” said CJ George, Managing Director, Geojit BNP Paribas.

The slump in price of synthetic rubber, made from a byproduct of crude, has truly put the squeeze on a million rubber growers in Kerala, mostly small and marginal. Not many are willing to bet on how long the government can artificially hold up the sagging price line that has dipped below Rs 100 per kg. For long used to a lazy lifestyle, many rubber growers are looking at bail-out options.

“It was in 2013-14 that I got Rs 16 lakh for slaughter-tapping two acres of rubber, over a 30-month period, at an average price of Rs 240 a kg. And I could send my elder son to US for higher studies. Now, the latex is fetching only Rs 90 a kg; my second son surely won’t be going to the US,” said Thomas George, a rubber farmer from Nilambur.

 If the stories coming out from the rubber belt are to be believed, many have stopped tapping, some are pondering the wisdom in taking up other cultivation, while the die-hard optimists have taken loans, pledging land and gold, to hold on to the vestiges of a luxurious life-style. Add to this, the shrill wake-up call that threatens to cut short the decades-old Gulf dream and the desolate picture is complete. 

Surely, more indicators of the edifices of what was till now a sure-fire economic model coming apart at its seams will manifest in the days to come. The question is, will the government take notice? And start taking remedial measures.



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